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The central bank is concerned about the inflationary impact of government spending and is likely to raise interest rates before long, says Peach. There’s also a crowding out effect in the bond market: the rise in bond yields will push interest rates higher across the economy and banks may cut back on lending to the private sector if they continue to add bonds on their balance sheets. But on balance Russia’s economy will likely cope.
“The upshot is that severe fiscal strains are unlikely to emerge in Russia. But a large budget deficit will still have an impact on the economy. Non-defence spending and public investment are likely to be areas that lose out if budget pressures intensify and the war drags on,” says Peach.
2.11 Putin revokes Russia’s foreign policy law and sets the stage for a new Cold War
Russian President Vladimir Putin revokes a law that outlines Russia’s main foreign policy goals on February 21 that sets the stage for more aggressive Cold War-like relations with the West.
Putin signed off on the foreign policy law himself in May 2012 during his third presidential term, which outlines Russia’s major foreign policy goals.
The previous law contained specific instructions for cultivating “cooperative relations” with foreign countries, based on “respect for neighbouring countries’ sovereignty” and a promise to work with the various world regions.
A new decree, which came into effect on the same day, revises those goals and has abandoned any attempt to cooperate with the West as well as ditching the requirement to respect other country’s sovereignty. Meduza reports that the specific points that have been removed from the law include:
· establishing external conditions that favour Russia’s long-term development;
· affirming the fundamental principles of the UN Charter, which require cooperation between states, based on equality and respect for the member states’ sovereignty and territorial integrity;
· active work on resolving the situation in Transnistria based on respect for Moldova’s territorial integrity, sovereignty, and neutrality;
· active cooperation with Belarus within the framework of the
supranational Union State;
· active assistance in the strengthening of Abkhazia and South
Ossetia as modern democratic states;
· promoting the creation of a single economic and civic space spanning from the Pacific to the Atlantic coast, including efforts to lift the EU short-term visa requirements for Russian nationals and collaboration in developing
a unified European energy complex;
· fostering a stable
and predictable relationship with the U.S., based on the principles of equality, non-intervention, and respect for mutual state interests, along with further efforts to relax reciprocal visa requirements;
· deepening trust and equal strategic partnership with China, as well as strategic partnerships with India and Vietnam and mutually
38 RUSSIA Country Report March 2023 www.intellinews.com