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Russia's Economic State Is A Reversal Of Fortune For Putin


Even Russia's government admits the country's economy is taking a hit from those sanctions. The plunge in the price of oil isn't helping that oil-driven economy either.


Russia's currency, the ruble, has lost nearly 40 percent of its value since just last month. That's not 14. That's 40 - four zero. And this week, the country's credit rating was reduced to junk.

MONTAGNE: For Russia's President Vladimir Putin, it's a dramatic and perhaps dangerous reversal of fortune. To learn more, we reached Sergei Guriev. He was a senior economic advisor to Putin. Then he voiced support for opposition leaders and two years ago was forced into exile. He is now with the influential political science institute, the Sciences Po, in Paris. Good morning.

SERGEI GURIEV: Good morning, Renee.

MONTAGNE: Why don't you give us a sense, please, of the scale of the trouble Russia's economy is in right at this moment?

GURIEV: Well, Russia has been in trouble like this in 2008, 2009. It was a crisis like this in 1998. It was a crisis like this in 1999 -'91, sorry. But I think this time around, the situation is perfect - perfect as in a perfect storm. And you have sanctions. You have low oil price. And on top of that, you have a lack of structural reform, higher corruption, bad investment climate, the only presence of the government and government companies. All of that together makes Russian economy quite vulnerable.

MONTAGNE: How much does sanctions - those sanctions imposed by the U.S. and the EU - figure into this economic downturn?

GURIEV: The sanctions per se would not be a big problem. But coupled with the oil price, they are a serious issue for the Russian economy. If not for the sanctions, Russia would be able to borrow its way out of this crisis. But sanctions cut Russia off. And in that sense, the fall in the oil price creates an existential threat for this nation. So it looks like reserve fund, the foreign currency - there's also the central bank - will be enough to go through a year or two. But after a couple of years, it's not clear how Russian government will break even and therefore it will have to cut spending quite substantially, which will, of course, have political implications.

MONTAGNE: Well, do you see any indication that Vladimir Putin has a plan to pull Russia out of its crisis. Is he getting the full impact of the political implications here?

GURIEV: If you listen to him and read the documents the government prepared, you can see that the major strategy is to wait until oil price goes up or maybe, for some reason, sanctions are lifted.

MONTAGNE: Again, you were an economic adviser to President Putin, you know, at the highest level. Do you believe what Bloomberg News recently reported? And that's that Putin is no longer even listening to the oligarchs who have backed him and who stand to lose big for more sanctions. I mean, he's not even listening to them.

GURIEV: Yes, I think Bloomberg is correct because both the big business people and economic ministers clearly understand the cost of the foreign policy decisions for the Russian economy. And they do talk about the situation, which is harder than the 2008, 2009 crisis. And they do talk about the public, which, by the way, suggests that they don't get Mr. Putin's ear in private.

MONTAGNE: Is it possible that these oligarchs, these extraordinarily wealthy and - you would think - powerful people around Putin - is it possible that they would turn on him?

GURIEV: Well, that depends on what you mean by turn on him. I think the system that Mr. Putin has created is built in a very different way where everybody understands that if you conspire against the government and the president, you may end up behind bars. And this is one of the explanations of why Mr. Evtushenkov, one of the richest people in Russia, did spend a few months under house arrest in 2014 and lost his oil company to the state-owned company Rosneft. One of the rumors was that there was some sign of disrespect or disloyalty on the side of Mr. Evtushenkov. I think Mr. Putin has centralized all the power to send a signal for oligarchs to understand that if they turn on him, they risk everything.

MONTAGNE: Thank you very much for joining us.

GURIEV: Thank you very much, Renee.

MONTAGNE: That's economist Sergei Guriev. He spoke to us from Paris. Transcript provided by NPR, Copyright NPR.