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wrap trade deals with politically motivated arms and energy deals
that bind client countries to Moscow. For example Russia currently has 40 international nuclear power projects under way worth $137bn, in which Moscow has financed the deal. The US is increasingly adopting the same tactics, but by more aggressively using the sanctions regime to promote US commercial interests.
The sanctions proposed on Russia’s Nord Stream 2 gas pipeline between the Yamal gas fields in Russia and Germany, for example, are purportedly to save Europe’s “energy security” but Europe’s gas imports have already been well diversified. Europe’s dependence on Russian imported gas has fallen from 80% in the 1970s to about 30% now. The goal of the sanctions is clearly to block cheap Russian gas imports to Europe to boost US exports of LNG
to the same market.
Privatisation
The Washington Consensus takes as a priori that privately owned businesses are more efficient and profitable than state- owned companies. While the Moscow Consensus does not deny the efficiency argument, the state is not prepared to give up the political leverage that comes with a lot of big international business.
Free trade comes with free markets where the privately owned companies are king. But another key aspect of the Moscow Consensus is that publicly owned companies play the lead role if the state wants to offer its package deals. If anything Chinese state-owned firms play an even more obvious role in trade/ investment. They have been investing huge sums in developing economies
in Africa, Asia, and Latin America under the Belt and Road programme, as well as making equity investments
in the producers of raw materials that China is short of – which is pretty much everything.
And unlike the West where individual companies offer individual deals,
the Kremlin continues to offer its international partners a comprehensive package that bundles together arms,
energy, trade and the financing for projects like a brand new $10bn nuclear power station.
Like with free trade, Moscow initially bought into the idea of privately owned enterprise, but quickly abandoned
it again as tensions with the West
rose. In 2008, then Russian president Dmitry Medvedev attempted to restart privatisations with a comprehensive programme, announcing his intent with a speech at St Petersburg International Economic Forum (SPIEF). That year marked the high water mark of Russia’s liberalisation and the closest it ever came to adopting the values of the Washington Consensus. But the crisis
of the same year, caused by the US sub-prime mortgage debacle, saw the programme abandoned and the start
of building up what is now the Moscow Consensus alternative where the state retains control of the biggest companies for political as well as commercial purposes.
The one concession that the Kremlin has made to privatisation is instead of setting up monopolies it has chosen duopolies instead: two big state-owned
open hostilities, but the start of the conflict began earlier with the US unilaterally withdrawing from the Anti- Ballistic Missile Treaty (ABM)
in 2001, a key part of Europe’s security infrastructure from the 70s, which the Brookings Institute called a “foreign policy disaster.” That was followed
by several disappointments on the business front. In the noughties Russia’s economy was booming and the Kremlin was looking for ways to modernise the economy quickly. With money in his pocket, Putin was hoping to make some strategic investments but was stymied at every turn.
Russia struck a deal to buy the almost bankrupt Opel carmaker in 2009 that it intended to use as a vehicle to rescue its own ailing automotive sector, but the deal collapsed at the last moment. In the end, Russia sold its stake in the giant automotive producer Avtovaz to Renault-Nissan.
And in a similar story, VTB bank bought 5% in European aviation company EADS with the hopes of getting a seat on the board and access to European technology to rescue Russia's ailing
“2008 marked the high water mark of Russia’s liberalisation and the closest it ever came
to adopting the values of the Washington Consensus.”
enterprises that directly compete with each other, such as Gazprom/Rosneft in the energy sector or Sberbank/VTB in the banking sector.
Economic war
Why has the Kremlin abandoned the Washington Consensus? Part of the reason is Russia has found itself in an undeclared economic war with the US. The emphasis since 2012, when it began to modernise its military in earnest, has been on security not prosperity.
Most commentators point to the annexation of Crimea as the start of
aviation sector. Again these plans were thwarted and VTB sold out.
If the business of business really was just business then Russia would have been willing to loosen its grip. Indeed, on the home market all the significant businesses that deal with the consumer – high volume, low margin businesses that have to be well run – are in private hands. But a key part of the Moscow Consensus is that the businesses in the strategic industries remain de facto under state control as they have
a role to play in the economic war with the West.
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