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[Global Times] Wang Xianju: Against sanctions, Russia is tactful

It has been nearly five and a half years since the United States led the western world in imposing sanctions on Russia in the spring of 2014. During this time, they gradually imposed measures including: "punishing" officials and entrepreneurs related to Russia, banning them from travelling to the United States and Europe, and freezing their assets in western banks. Restricting the import of Russian oil and gas, and stopping the export of deep-water oil drilling, polar development, shale oil refining and other equipment to Russia. Prohibiting export to Russia of any high-tech products in the military industry and banning loans, credit guarantees and other forms of financial cooperation to Russia. Although these sanctions have a certain degree of negative impact on the Russian economy, Russia has also taken a series of countermeasures to minimize the effect of western sanctions. Besides, Russia's counter-sanctions have caused economic losses to the US and Europe, forcing them to ease their stance. How did Moscow do it?

In 2015 and 2016, the Russian government formulated two anti-crisis plans in succession, identifying four priorities and 60 measures against sanctions. They include stimulating investment, balancing regional development and supporting small and medium-sized enterprises. The finance ministry offers loans to Russian companies that have suffered losses as a result of the sanctions, allowing them to delay repayment of their debts. Exporters are exempt from the obligation to purchase foreign exchange. Russia has set up a government import substitution committee headed by the Prime Minister, changed the principle of "technical performance first" to "made in Russia first", and decided to reduce imports from 20 key sectors, including defense production, agriculture and animal husbandry, within five years. To prevent financial risks, Russia began to replace VISA and Master CARDS with MIR card. Russia has also cut its holdings of US treasuries and bought large amounts of gold. In 2018, the parliament passed the law On Measures to Affecting (Counteract) Unfriendly Acts of the United States and Other Countries. The government has banned all imports of farm and animal products from the European Union, the United States, Australia, Canada and Norway.

Given that countries such as Germany, France, Italy and Japan have different attitudes to Russia from the US, Moscow has adopted a policy of discrimination. Every year, Putin invites Japanese prime minister Shinzo Abe to attend the "Eastern Economic Forum" held in Vladivostok. Japan has increased investment in Russia and expanded cooperation in the energy sector. Despite pressure from Trump, German chancellor Angela Merkel has insisted on opening the 1,200-kilometer Nord Stream No.2 natural gas pipeline with $11 billion of investment in Russia.

Over the past five years, western economic restrictions have cost Russia $50 billion. However, the EU has also lost $240 billion, affecting jobs in EU countries and losing the Russian market. Before June 2015, Russian defense industry systems relied on NATO and EU countries for 640 military projects, mainly optical and radio-electronic equipment. Now Russia is primarily developing and producing these by itself. In 2012, Russia imported $46 billion's worth of agricultural products, accounting for about 14% of its imports, of which meat and milk accounted for a large proportion. Since banning western imports of farm and animal products, Russia has dramatically increased its investment in agriculture, with remarkable results. Since 2016, the annual grain output has exceeded 100 million tons and exported over 20 million tons of agricultural products. The "import substitution" policy has also shown initial success in the automobile industry, metal manufacturing, textiles, machinery, equipment and transportation, with import rates of these products falling by more than 20% each.

As the saying goes, "when it is dark in the west, it is light in the east." Thanks to more "eastern diplomacy", Asia-Pacific countries accounted for 30% of Russia's foreign trade in 2016, up from 25% in 2013. Russia's trade with China hit a record of $107 billion in 2018.

To sum up, Russia's anti-sanctions emphasizes the firmness of struggle and the flexibility of strategy. Russia does not refuse to engage in dialogue and contact with western countries. At the same time, it is good at taking advantage of internal contradictions in the west and treating them differently. In the economic field, Russia formulated anti-crisis plans promptly, made "precise" responses, and implemented the policy of "import substitution" to promote the change and improvement of the domestic economic structure.

Wang Xianju, Research Fellow at National Academy of Development and Strategy, Renmin University of China.

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