Siim Kallas, who's term as a EU Commissioner recently ended, said Russian society can handle the economic sanctions that has been imposed from the West this year. However if the economy turns worse, further military ventures could be on the cards.
Kallas said in an opinion piece published in EurActiv that the Baltic countries and Kazakhstan are fearful of further aggression by Russia, which has occupied parts of Georgia, Moldova and Ukraine.
Speaking on sanctions against Russia, Kallas said a credit crunch is on the horizon for Russian companies, with around 25 billion euros to be repaid this year, while refinancing will be tough as interest rates have skyrocketed. “Overall, between now and the end of 2015, Russian banks and companies will have to repay no less than 134 billion dollars (107 billion euros).”
He said Russia has attempted nine debt auctions, which have failed, and one attracted only 208 million euros at a high interest rate. Capital continues to flow out while military spending is set to increase 21 percent in 2015.
Russia could impose restrictions on capital movements or on the exchange rate of the ruble, Kallas said, adding that Rosneft and troubled Russian banks could default.
“All this points to a Russian economy in deep trouble. But Russian society is very resilient to economic sanctions. This is a society which has for centuries accepted the loss of prosperity as part of the cost of imperial and military objectives,” the former EU Commissioner said.
“The fact is that most Russian citizens live still in Soviet conditions – the same miserable apartments, the same relative poverty, the same almost total isolation from outside world,” Kallas said, adding the Russian society is highly resistant to hardship.
He said the currency has depreciated, but for the vast majority of Russians the exchange rate plays no part in their lives, while there has been hunger and shortage of food in Russia for decades, and only 8 percent of Russians travel abroad each year, so the sanctions and bans will not go far.
“The most probable date for the expiration of Western sanctions is August 2015. Does anybody seriously believe that Russia will end its occupation of territory in Ukraine, Moldova or Georgia?” Kallas said.
He said if things look worse by the end of 2015, another military adventure could be turned to to boost morale.