Putin's Plan to Double Down on Venezuela, Syria and Ukraine Could Be Sending Russia into Bankruptcy; Russian Involvement in Venezuela, Syria and Ukraine Could Bankrupt the Country

By Courtney, William; Shatz, Howard J. | Newsweek, February 22, 2019 | Go to article overview

Putin's Plan to Double Down on Venezuela, Syria and Ukraine Could Be Sending Russia into Bankruptcy; Russian Involvement in Venezuela, Syria and Ukraine Could Bankrupt the Country


Courtney, William, Shatz, Howard J., Newsweek


Byline: William Courtney and Howard J. Shatz

In December, President Vladimir Putin called for Russia's economy "to enter another league." But that priority is far from clear if one looks at where the Kremlin places its foreign policy chips.

The latest gamble is Venezuela, where Russia recently flew two nuclear-capable Blackjack bombers. Secretary of State Michael Pompeo dismissed this as "two corrupt governments squandering public funds and squelching liberty--while their people suffer." Indeed, Venezuela is an economic basket case where, the International Monetary Fund predicts, inflation this year will hit 10 million percent.

The U.S., too, has taxed its domestic economy to spend vast sums on foreign wars, from Korea and Vietnam to Afghanistan and Iraq. During the Cold War, it expended resources to counter Soviet interference in multiple poor countries, such as Nicaragua, Angola and the Horn of Africa nations. For the most part, however, U.S. foreign policy has given high priority to strengthening America's dynamic economy and supporting global economic growth. During the 1997-98 Asian financial crisis, the Federal Reserve not only backed the global policy response; it took a lead role in supporting some affected countries. Ten years later, during the global financial crisis, the Fed was central to the global monetary response.

Turning to trade, during the Obama administration, the U.S. and 11 other countries negotiated the Trans-Pacific Partnership. Despite canceling it and launching questionable trade wars, the Trump administration has updated major trade accords with Canada and Mexico and also with South Korea. In January, the U.S., European Union and Japan agreed on further efforts to counter unfair trade and reduce barriers to innovation.

Russia's foreign policy, however, hears a different economics drummer. The Kremlin seems driven more by political ambition. It pursues a sphere of influence nearby and great power status beyond, in a quest to exercise sway over its neighbors and counter U.S. and Western influence globally. But the Kremlin's efforts are often expensive or self-defeating.

Prosecuting war in eastern Ukraine and sustaining Crimea has taken an economic toll on Russia, directly and through Western sanctions. Bloomberg Economics estimates sanctions have cut Russia's gross domestic product by 6 percent over the past four years. And nonmilitary Russian spending in those areas may burden Russian GDP by 0.3 percent per year. Russian- occupied separatist areas in Georgia and Moldova also require subsidies.

Even some efforts at peaceful cooperation have disappointed. Although relatively young, the Eurasian Economic Union of Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan has stumbled in economic integration. Members have stronger trade relations with countries outside the union.

Russia's great power quest is also costly. The military intervention in Syria may have forced spending cutbacks at home on health, education and welfare. …

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