January 27th 2018

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Articles from this issue:

COVER STORY Loy Yang just latest critical asset to go offshore

EDITORIAL Behind the power shift in the Middle East

CANBERRA OBSERVED Freedom of religion just an afterthought?

GENDER POLITICS Family Court washes hands of gender-dysphoric kids

INTERNATIONAL AFFAIRS Western sanctions have forced Russia to upskill

INTERNATIONAL AFFAIRS China exerts soft power on our southern neighbour

ENVIRONMENT Senate committee puts marine life before people

SEXUAL ABUSE Royal commission report ignores cause of abuse

HIGHER EDUCATION Critical thinking and the culture of skepticism

INTERNATIONAL AFFAIRS U.S. urges Taiwan rearmament to counter China threat

PHILOSOPHY A reflection on thoughts of Richard Dawkins

MUSIC Group theory: A good band is greater than its parts

CINEMA Darkest Hour: A long time till dawn

BOOK REVIEW 'Populism' and the new social divide

BOOK REVIEW Poems outshine dross of inept introduction



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Western sanctions have forced Russia to upskill

by Craig Milne

News Weekly, January 27, 2018

American Senator John McCain, speaking in support of the economic sanctions imposed on Russia following the re-incorporation of the Crimean Peninsula into its territory, dismissed post-Soviet Russia as “a gas station masquerading as a country”.

Notwithstanding McCain’s hyperbole and anti-Russian animus, it would be fair to say that in 2014 the Russian economy was overly dependent on energy exports.

The collapse of communism and subsequent dissolution of the USSR in 1991 carried away a large proportion of the once-gigantic Soviet industrial base. Old, moribund production facilities, even whole industrial sectors, were lost; unable to compete with Western goods and services that had become freely available.

As Russia was in the process of becoming the world’s largest oil and gas exporter, the various thieves, liberals and free traders who ran Russia during the 1990s (not unlike their Australian counterparts) saw little wrong with massive de-industrialisation; just a bit of “creative destruction”, ultimately beneficial in their view.

The collapse in oil prices, from a barrel price of $US120 in 2013 to below $US30 in 2016, together with the imposition of sanctions, has led the Russian Government to serious policy reforms and determined diversification and import substitution efforts.

From the Russian perspective, seldom given any explication in Western discourse, the economic sanctions were a continuation of a series of hostile actions that began when the Americans reneged on their undertaking to allow no eastward expansion of NATO, given Soviet support for German re-unification. Now former Warsaw Pact nations, and even former Soviet Republics, have been enlisted into NATO. Strategically located, and hostile, neighbours, Ukraine and Georgia, have been offered eventual NATO membership.

Russia has few friends within Western elites. Anti-Russian sentiments are expressed across the political spectrum. For those on Western liberalism’s left node, Russia is deplored because the post-communist state has promoted the restoration of Orthodox Christianity to the centre of the nation’s moral life. Leftists despise Christianity and the astonishing revival of the Russian Church is anathema to them. That all the good work performed by the USSR, a militantly atheistic state that set itself in the vanguard of the materialist march to a post-Christian world dreamed of since the Enlightenment, has been overturned is a massive disappointment to the left.

Connected to this is Russia’s failure to embrace the deviant sexual agenda that is l’air du temps of the Western left.

On liberalism’s right flank, Russia is deplored for its failure to submit to the role denominated for it within the U.S.-led unipolar world order: a nation militarily neutralised, reduced in influence, even fragmented, supine in foreign policy, with its stock of natural resources freely available for exploitation by unfettered global capitalism. Under Vladimir Putin Russia is having none of that.

The purpose of the sanctions was to damage the Russian economy; to force its government to adjust its behaviour to suit American wishes. That won’t happen.

In some ways, the sanctions have been beneficial to Russia. To preserve its foreign reserves, the Russian Government allowed a free float of the rouble, a reform that would have been unlikely without the pressure of sanctions. The rouble subsequently lost half of its value; a major boon for domestic farmers and manufacturers.

Local producers were further advantaged by Russian counter-sanctions and a policy shift towards more self-reliance, based on the realisation that Western countries could not be trusted as economic partners as long as the Americans were dictating policy. As a result, Russia has reoriented its economic strategy towards China and the emergent Asian economies.

China solidly supports this shift, not only in terms of gaining the substantial trade and investment opportunities that would formerly have flowed to Germany, but also from the realisation that if the Americans were to succeed in bending Russia to their will, China would be next on their list.

Even the fall in energy prices, held by Western experts to be ruinous for Russia, has not been problematic. Low prices forced productivity improvements on the Russian energy sector, making it now the world’s lowest-cost gas producer, and drove policies favouring economic diversification and expansion in agri­culture and manufacturing.

Every nation has its problems and Russia has many intractable ones. Nevertheless, the country has good prospects. This positive outlook is not the common view of Russia’s future; for that look at commentary from sources like The Economist, the Financial Times or the Jamestown Foundation.

What these hostile observers all assume is that the globalist model of goods, capital and people sloshing around without restriction is the only way that the world can move forward and that an inward-looking, culturally distinct, semi-protectionist state is doomed to inevitable decline.

Although this has been the constant position of economists, who see the world purely in cosmopolitan and theoretical terms, the empirical facts of national development have always been different.

Craig Milne is executive director of the Australian Productivity Council.

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