Responding to Russia
Why Sanctions Matter

They hurt the Kremlin a lot more than most Western analysts appreciate.

Published on: August 14, 2017
Vladimir Milov is an economist and energy expert. He was former Deputy Minister of Energy of Russia (2002), adviser to the Minister of Energy (2001-2002), and head of strategy department at the Federal Energy Commission, the natural monopoly regulator (1999-2001).
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  • Roy Tyrell

    Russia’s fate is in it’s own hands. What America does or doesn’t do (sanctions, no sanctions) will not matter in the long run.

    • John Schwartz

      Thanks for telling everybody that you didn’t read the article.

      • Roy Tyrell

        I read the article. It’s propaganda.

        • Which part?
          It doesn’t hurt them?

          • D4x

            Damir: I think TAI has to look at gold, in addition to hydrocarbons, and how Russia’s Central Bank appears to be doing a fine job, when looking at Russia’s economic future.

            This post is not ‘propaganda’, but it is not including other factors. My bet has been Russia is helping Egypt with wheat, a better way to gain influence in Egypt than whatever USAID can offer, even if we can get past the Obama view of al-Sissi as ‘illegitimate’.

            As for US sanctions? They are counter-productive to the bigger issues, just like Kerry said in 2015. In 2017: Co-operation with Syria to contain Iran/Hezbollah; possible alignment with India re: China along that border; the Arctic Council…

          • adk

            If gold, diamonds, timber, etc. were such important contributors to Russian budget, the Soviet Union would still be around.

            As for “Russia’s Central Bank appears to be doing a fine job, when looking at Russia’s economic future”, you either don’t understand or pretend not to the power structure of the Putin’s regime. It’s Putin and his circle of cronies that call all the shots in Russia, and Russia’s Central Bank is no more independent than Russia’s courts.

            Milov actually addressed that — Russia had cut imports and has been spending away its hard currency national funds created during the oil boom decade of 2000-2010. But when that money runs out, and with largely unreformed economy, then what?

          • D4x

            The real question should be: How does putting “the Kremlin in quite a bind” benefit American interests? or the interests of the rest of the world?
            Regarding your other points:
            The global economy has dramatically changed since the dissolution of the Soviet Union in 1991, when global population went from 5.4 billion to 7.4 billion in 2016 average 1.48% per year.

            GDP per capita, PPP (constant 2011 international $) went from $8,886 in 1991 to $15,026 in 2016, per World Bank.

            More important is the rate of growth in GDP per capita, PPP. From 1991 to 2000: 1.8% per year. From 2000 to 2016: 2.8% per year. Without digging further into the data, the point is that rising incomes in China, India, and Brazil since 2000 was enough to dramatically change demand for resources for hundreds of millions more middle class people.

            Before I wrote my comment a day ago, I checked some of the data:

            “MOSCOW, Aug 2 (Reuters) – Russia’s Reserve Fund increased to $16.91 billion as of August 1 from $16.71 billion a month earlier, finance ministry data showed on Wednesday.
            The finance ministry also said the National Wealth Fund, which is designed to help balance the pension system, rose to $74.72 billion from $74.22 billion as of July 1. (Reporting by Andrey Ostroukh; Editing by Maria Kiselyova)”

            “…The Russian reserve position fell to a low of $350 billion by mid-2015, about where they were at the depths of the 2008 crisis.

            Reserves then began a second recovery in late 2015 and today stand at around $420 billion. This recovery is a tribute to the skill of the head of the Central Bank of Russia, Elvira Nabiuillina, who has twice been honored as the “Central Banker of the Year.” …

            Russia’s strong gold position combined with a very low amount of external debt leaves Russia in the best position to withstand economic distress without default or a funding crisis in the future. This is one reason U.S. economic sanctions have been relatively ineffective at hurting the Russian economy despite a slowdown and recent recession.

            This trend in gold as a percentage of total reserves is highly revealing. It is part of a long-term effort by Russia and China (among others) to abandon the dollar-based international monetary system. They’d prefer a system less congenial to the United States and more accommodating to rising gold powers such as Russia, and rising geopolitical powers such as China. …”

            “In 2017 British magazine The Banker chose Nabiullina as “Central Banker of the Year, Europe”.”

            My conclusion was that Russia is doing a good job managing their reserves, and, sometimes cronies can be very effective managers of Central Banks, especially when the CronyMaster understands the importance of sticking to their budgets. The Russian people may want better milk and beef, but, historically, they have been incredibly supportive of sacrifice for Mother Russia. I pay more attention to foreign policy, and have the highest regard for FM Lavrov.

            I did factor in’s bias towards gold-bugging. However, the world has depended on the USD as the ‘global reserve currency’ for international trade since 1944. The USA has not been a good steward of the USD since 2000. The Euro has not managed to make enough of a dent to replace the USD. If China and Russia collaborate to create a gold-backed alternative, then U.S. sanctions focused on banking transactions will not be very effective.

            As to the Russian debt held by Western banks, and access to foreign direct investment in Russia? I am still recovering from the revelations since 2008, and avoid digging into those noxious weeds.

            Besides, HR3364 exempted NASA from all sanctions. Use your imagination as to how creative all sorts of banks and private equity can be:

            SEC. 237. Exception relating to activities of the National Aeronautics and Space Administration.

            (a) In general.—This Act and the amendments made by this Act shall not apply with respect to activities of the National Aeronautics and Space Administration.

            (b) Rule of construction.—Nothing in this Act or the amendments made by this Act shall be construed to authorize the imposition of any sanction or other condition, limitation, restriction, or prohibition, that directly or indirectly impedes the supply by any entity of the Russian Federation of any product or service, or the procurement of such product or service by any contractor or subcontractor of the United States or any other entity, relating to or in connection with any space launch conducted for—

            (1) the National Aeronautics and Space Administration; or

            (2) any other non-Department of Defense customer.


            Then there is the concluding paragraph in POTUS’ August 2, 2017 signing statement on HR3364:

            “…Finally, my Administration particularly expects the Congress to refrain from using this flawed bill to hinder our important work with European allies to resolve the conflict in Ukraine, and from using it to hinder our efforts to address any unintended consequences it may have for American businesses, our friends, or our allies.”

          • adk

            “The real question should be: How does putting “the Kremlin in quite a bind” benefit American interests? or the interests of the rest of the world?”
            Simple. Putin’s Russia chose to oppose the US/West wherever it can and ally itself with the US enemies, Iran being #1. That was their decision, and they have to suffer the consequences. The whole world, not just the US, would benefit from non-belligerent Russia that applies its energies to make life better for its own people instead of playing crappy geopolitical games.

            Are you by any chance Russian or on some Russian payroll? You seem to channel Russian propaganda a lot on these pages, in great detail. I’m referring, in particular, to your statements like this:
            “The Russian people may want better milk and beef, but, historically, they have been incredibly supportive of sacrifice for Mother Russia.”

            That’s what Russia’s scoundrel masters have been telling their populace under both the Communists and now the Putin gang. “Motherland is in mortal danger! Everything for the Motherland!”

            As Russian PM Medvedev put it recently, “No money for pensions, but have a good day!”

          • D4x

            History did not start in 1917. Unlike you, I study history.

            My paternal great-grandparents fled Tsarist Russia, most likely around 1880. My paternal grandparents were so scarred they never mentioned that, because they were born in Hungary, and England.

            Those grandparents had to leave, to come to America, before 1914.

            I only found out about my Russian ancestry when it was mentioned in one great-uncle’s obituary, in the NYT. He had been born in Hungary

            He is lost to American revisionist history. I wanted to write his story, but, no one wants the truth, not here, not there. Especially not about a Jew.

            Might as well try to work with the Russia we have.

            fwiw, Persia deferred to Tsarst influence in 1828,conceding defeat, Russo-Persian War of 1826–28

            Go fishing elsewhere.

          • adk

            It’s hard to take you seriously when you are all over the place. For example, what has Russo-Persian War of 1826–28 to do with the current Russia-Iran alliance of sorts? Or why would you spend so much time quoting and praising Russian FM Lavrov who is a) a veritable liar and b) a secondary player in the Putin regime? And so on, and so forth.

            But, more importantly: you seem to fancy yourself as a supporter of Russia (Russian people?) and better relationships between US and Russia. In fact, you are a supporter of the Putin regime which has been leading Russia into yet another dead end. With your family history, you should learn why your great-grandparents fled the Tsarist Russia and didn’t want to talk about that — from all the miseries they had experienced there, for sure. Luckily for you, they were smart enough not to remain among those who, as you put it, “have been incredibly supportive of sacrifice for Mother Russia.”

            So if a contemporary foreigner observer had pointed out that the Tsarist Russia was a miserable place for most of its people, would you call him a Russophobe? And after 1917, the Soviet Russia only became much worse for its own people.

            There’s a term for Putin-loving Westerners like you, and it’s useful idiot. Sorry.

          • D4x

            Secretary of State John Kerry and Undersecretary of State for Political Affairs Wendy Sherman hare a celebratory toast of madeira wine on the flight back to Washington from the nuclear talks in Vienna, on July 14, 2015
            (Photo: State Department/Public Domain)

            “…Undersecretary of State Wendy Sherman said Thursday it would have been difficult
            for the U.S. to tell the world that it “should wait for the United States Congress.”

            “It would have been a little difficult when all of the members of the P5+1 [the other five are Britain, France, Russia, China and Germany] wanted to go to the United Nations to get an endorsement of this –
            since it is a product of the United Nations process – for us to say, ‘well excuse me,
            the world, you should wait for the United States Congress,’” she told reporters.
            Sherman, the lead U.S. negotiator in the talks that produced the Joint Comprehensive Plan of Action (JCPOA), …”

            Wendy Sherman was the Clinton administration’s policy coordinator for North Korea. Sherman
            was Under Secretary of State for Political Affairs from 2011 to 2015.
            Wendy Sherman, 2017:

            “The main reason we are where we are today is because North Korea has walked away from every denuclearization agreement ever reached. The regime clearly wants nuclear weapons more than any inducement.
            And it has not changed its behavior in the face of sanctions.”

          • adk

            Is this a response to my post? If so, I have to ask, “And your point is?”

          • Андрей Балыкин

            Victim of American propaganda… I feel sorry for you…

          • adk

            I noticed you’d changed your original post quite a bit… was it too embarrassing?

          • mal

            Russian forex reserves have been growing, and and so has the Russian economy.



            Their inflation is at record low.

            So… Russia is not running out of money, and and their economy turned out to be highly reformed.

            So the answer to your question would be they will shrug and continue to do their own thing and improve, and grow, like they do now.

          • Roy Tyrell

            People cling to whichever fantasies they wish to believe in. The official newspeak out of Washington has been doing mental gymnastics for 16+ years now rationalizing every self created disaster in the ME with some new official narrative. Likewise, simply wishing Russia away won’t make it happen. Neither will sanctions from a state that has negligible trade with Russia.

            Russia’s ailments are self-created. The cure must be as well.

            Americans will continue to tell each other bedtime stories to try and figure it all out.

          • adk

            “Neither will sanctions from a state that has negligible trade with Russia.”

            True, the US has negligible trade with Russia, but you simply don’t get the point (or you didn’t read the article wishing, perhaps, to cling to your own fantasy instead?) It’s not the US-Russia trade that has been sanctioned, it is, in effect, Russia’s access to international financial markets which does hurt them a lot. Plus, specific Russian oligarchs close to Putin are also sanctioned, and that will hurt them and others as they realize that Putin cannot protect them in the West.

            For evidence, just look at the campaign Russia launched against the far more limited Magnitsky Act.

          • Roy Tyrell

            They don’t give a sh-t about the Magnisky Act and American financial markets answer to their masters in Beijing.

            America has zero leverage anywhere. But if it makes you feel better to believe in fairy tales…

            … I’m sure if you keep digging you will find Jimmy Hoffa’s tomb right next to Iraq’s WMD…

          • adk

            Your deep knowledge of everything is very impressive.

          • Roy Tyrell

            Why thank you.

            Please keep us all informed of Russia’s impending implosion. You can bulldog it for us for the next 1000 years or so.

          • adk

            Not at all, comrade. Not at all.

    • Григорий Васлевский

      it`s true

    • why?

  • D4x

    A Russia ‘down and flailing’ does not sound good for anyone. Good thing Russia knows the value of being a huge source for gold. Russia is poised to not only weather the sanctions with their other key exports (wheat, diamonds, gold, coal, fertilizer, fish, timber), but also take advantage of global instability by selling more gold to nervous investors in India, China, and…the USA.

    What will happen to the USA economy if China and Russia succeed in establishing a gold-backed alternative to the USDollar for international trade?

  • Алексей Глушенков

    Something in the article is true, something is doubtful, and something is simply silent. That is, the author is not objective.
    The problems of the economy … They are in all countries. But it is extremely unfortunate that the West is trying to solve the problems of its own economy at the expense of Russia. Russia is far from ideal for its ordinary people for more than 30 years, since the collapse of the country under Gorbachev. Then Yeltsin, who was a clear step of the United States. Why does no one say that the American advisers were in Russia at that time and even presided over the Russian presidential elections in 1996? The goal was achieved – the country was destroyed. Just like many other countries.
    Expansion of the United States and attempts to subjugate the entire globe – yes, a good idea, but the attempts to look good and democratic at the same time are simply ridiculous. America needs to choose – either domination or democracy.
    Just admit that they are destroying other countries for that. To include them in their economies.
    And everything else is just a smoke screen.

  • Oleg Pechinin


    • GS

      Туда им и дорога. Страна рабов и сволочей.

    • who is that guy?

  • John Baptist

    It doesn’t hurt Russia at all when you are compensating the same amount back to Russia by installing a Russian friendly face unto yourself. You have stopped yapping about on Ukrainian front rather have backstabbed the Ukrainian leadership which you supported with so much fanfare. You have to act on eastern front with real force, not they phoney measures and sanctions.

  • Григорий Васлевский

    Милов не только не пытается опровергнуть известные американские пропагандисткие штампы, но и более укрепляет веру американце в них.
    Если по сути статьи:фин санкции не могут быть всеобъемлющими, так как в противном случае западным кредиторам можно попрощаться с 500 млрд долл долга. Ради Украины? Не смешите бандеровцев.
    Санкции против нефтегаза вредят больше самим корпорациям США и очень серьезно усиливает необходимость самостоятельного развития технологий. Фактически США помогают России слезть с нефтяной иглы за свой счет. Мы уже видим некоторые результаты такой политики в росте промышленного производства и сельского хозяйства России.
    Milov is not only trying to refute the well-known American propaganda stamps, but also more strengthens the faith of the American in them.
    If in fact the article:fin sanctions cannot be comprehensive, because otherwise Western creditors can say goodbye to $ 500 billion dollars of debt. For The Sake Of Ukraine? Do not tell Bandera.
    Sanctions against Naftogaz hurt more by the corporations and very seriously reinforces the need for independent technology development. In fact, the US help Russia to get off the oil needle at his own expense. We are already seeing some of the results of such a policy in the growth of industrial production and agriculture of Russia.

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