Page 20 - bne_newspaper_August_3_2018

Opinion
August 3, 2018 www.intellinews.com I Page 20
MACRO ADVISER:
Russia’s August angst
Chris Weafer of Macro-Advisory
It is a tradition amongst Russian watchers to remind ourselves that August is the month when unusual and trend changing events take place more often than in any other month of the year. Despite it being a supposedly quiet holiday month, rarely does Russia actually get away without some crisis to deal with. This year is already shaping
up to be one of those that confirms the sequence, as a group of senior US senators are determined to push new and dangerous sanctions legislation against Russia.
In an op-ed ahead of the July 16 Helsinki Summit we noted that Moscow was deliberately taking
a huge risk with the meeting because the more positive the summit looked to the Washington audience then the greater the risk US senators would hit back with new sanctions initiatives, to hit both Russian President Vladimir Putin and the US’ Donald Trump. The calculated risk that the Kremlin may have considered was that a) the anger would diffuse during the annual August recess on Capitol Hill and b) Trump may take a more pragmatic position and refuse to sign any new legislation. We now know that the Senate is not taking a break this August because there is such a backlog of presidential nominations to be confirmed. Some senators are taking advantage of the unusual August session to submit new legislation that would force the White House to impose tougher sanctions against the Russian state and more oligarchs. Whether Trump would actually sign off of any new initiatives remains to be seen.
Historically, major political events, both domestic and geopolitical, have not been uncommon in August. This was the month when construction of the Berlin Wall started back in 1961.
In recent years, sanctions have been imposed
in August and it may again happen this year. In August 2014 the US, EU and several other nations imposed sectoral sanctions against the Russian banking and energy sectors as a result of the deterioration of the situation in Eastern Ukraine. To a large extent the Russian economy adapted
to these sanctions relatively effectively and, it can be credibly argued that these sanctions actually helped Russia take some tough decisions that have benefited the economy. Devaluing the ruble and the Budget Rule, which aims to balance the budget at $44 Urals in 2021, are certainly in that category.
But the benign sanctions backdrop changed in August last year when President Trump signed the Countering America’s Adversaries Through Sanctions Act (CAATSA). That was a game- changer and continues to deliver consequences that are still hurting the Russian economy. The senators sponsoring the latest sanctions threat are promising to force even more damaging enforcement of that legislation this August.
Perhaps this year Russia may get a very rate positive event in August? For those with an inclination towards optimism, the always active rumour mill in Moscow suggests that there may be some announcement with regard to Ukraine in the coming weeks. Normally one dismisses most rumours in Moscow unless persistent and broadly sourced, as these are. The suggestion is that the Kremlin, keen to build on the positive sentiment