Updated at 11:07,12-12-2017

Zlotnikau: Europe to avoid serious economic confrontation with Russia

Euroradio

Euroradio has asked economist Leanid Zlotnikau about the economic consequences of the conflict in Crimea and the things Putin is afraid of.

Euroradio: Crimea is subsidized, why does Russia need additional financial problems?

Leanid Zlotnikau: Russia is trying to solve geopolitical problems. The economic problems are secondary. Alexander Rar (German political scientist – Euroradio’s note) wrote in his book Putin’s Way: The very existence of Ukraine turns the dream about Great Russia into wishful thinking. Ukraine plays a great part in Putin’s plans of creating the Customs Union and becoming a world power centre. It will not happen without Ukraine. Putin knows that Russia has a lot of resources and that Russia will face problems with resources in the future. He is afraid that other poles will take away Russian resources. It will be able to survive only if it becomes big.

How will Putin support the economy?

There is no threat. Russia has huge reserve assets and the stabilization fund assets. They have over $700 billion in reserve. The country will endure the peak tension at the stock exchange. However, Russia will not be able to go on without western technologies in the future.

All the pipelines were built in the Soviet time. 80% are depreciated and need to be replaced. Russia needs 2-4 trillion dollars to improve its energy infrastructure. And it needs western investments and technologies. Putin is not afraid of having to spend money on Crimea.

What can the West do: impose economic sanctions, freeze accounts?

The West cannot block anything to make Russia back off now. There is a threat in the future. Russia has been suffering from the outflow of investments for a couple of years. It had been planned to stop the outflow this year and get an inflow. But there will not be any inflow and they are afraid of it. What economic measures can be taken? Russia imports a lot of products and food from Europe. But Europe cannot use it because Russia may stop gas supplies in response. It is not clear who will suffer more in such a situation. Europe depends on Russia and Russia depends on Europe. There are steady strategic relations. Europe will avoid serious economic conflicts. However, if the relations with the West get spoilt, Russia will not get investments –the same way as Belarus is not getting them now.