Economic sanctions and the fall in oil and gas revenues were not the only afflictions suffered by the Russian economy in Putin’s third and fourth presidential terms. The Crimean annexation itself was a costly venture. Kudrin complained that Moscow’s direct support to the small peninsula in the first twelve months after the military operation cost $7 billion, and indirectly, according to him, over the next three to four years the government would have to set aside at least $150 billion and perhaps as much as $200 billion to prop up Crimea’s economy and construct the necessary links with Russia.1
These Crimean costs attracted less attention abroad than the deluge of sanctions directed at those members of Putin’s entourage considered complicit in framing, encouraging or implementing policy on Crimea. Their Western bank accounts were frozen, and they themselves were banned from travelling to America and its allies. Sanctions were also aimed at Russia’s six largest banks, the four largest hydrocarbon companies and fourteen arms-exporting firms, which were prohibited from raising capital in America and associated countries, with the objective of cutting Russia off from funds to modernize its hydrocarbon and armaments sectors. Whether or not by design, this was the most damaging punishment: the business of extraction, refining and transporting Russian gas and oil was overdue a root-and-branch renovation. As the ruble tumbled in value Gazprom, Rosneft and other Russian corporations could no longer meet their debt repayments, and sanctions prevented them from raising new Western loans or extending old ones.2
At the same time the Western powers supplied financial assistance to the Ukrainian government. Immediately after the Crimean annexation the International Monetary Fund announced itself willing to lend $17 billion to Ukraine, and made $4.5 billion readily available as President Poroshenko sought to prevent economic collapse. By February 2015 agreement was reached to approve a conditional loan of $17.5 billion. The European Commission joined in, in May to December 2014 providing a €1.4 billion loan for macro-financial assistance, adding another €1.75 billion in 2015.3 The loans came with strings attached: while the aim was to save the Ukrainian people from ruin, the Ukrainian authorities were also required to make the fundamental reforms necessary to gain associate membership of the European Union. This did not go unnoticed in Russia, whose leadership had been maintaining throughout 2013 that the West was plotting to grab control of Ukraine.
Meanwhile, Putin hastened to compensate targeted individuals for the material losses inflicted by the sanctions. Irritating as it was to be prevented from visiting Paris or New York, none of them was to suffer a loss of wealth: victims of Western action were to be treated as patriots who deserved national succour. The targeted companies and banks received protection from the Finance Ministry, which bailed them out with loan repayments and a line of ready credit. Putin’s largesse, however, could not be unlimited or permanent. The sanctions forbade the provision of fresh loans that might be used to develop the key economic sectors, which meant financial institutions in Russia were suffering as well as individuals. The Vneshekonombank was sharply exposed after meeting loan requests from Russian corporations for the Sochi Olympics, for the Crimean annexation and for the fighting in eastern Ukraine. Pressed to pay off its own loans, the bank approached the government for a $20 billion bailout – and ministers obliged.4
On the few occasions Putin spoke about the Western sanctions he was defiant:
In point of fact the history of Russia shows we as a rule lived under sanctions starting from the moment when Russia began to stand on its own feet and felt strong. When our partners in the world saw Russia as a serious rival, various restrictions were introduced on various pretexts. This has been the case throughout the course of our history. I’m not now talking about the Soviet period but rather this was the case even earlier, before the October Revolution. For that reason there is no surprise in all this.5
This was looking at the past through a distorting lens. Tsarist Russia had never suffered from foreign economic sanctions: quite the reverse – direct investment poured into the Russian Empire from abroad, with France and Belgium, closely followed by Britain and Germany, seeing a gleaming opportunity to make millions out of Russian factories and mines as the Russians made their bid to become an advanced economic power. Putin’s portrait of a nation persistently singled out for malicious treatment by Johnny Foreigner is simply political paranoia. That he can spout such nonsense probably means he has begun to believe it.
In June 2017 Putin told viewers of the ‘Direct Line’ TV phone-in programme about Washington’s moves to reinforce the sanctions. ‘So that if it hadn’t been Crimea or other problems,’ he explained, ‘they would still have invented something to act to contain Russia. It’s always the same policy of containing Russia.’6 Presidential spokesman Dmitri Peskov further demonstrated this pathological mistrust of Western intentions in arguing that the sanctions were a ploy to alienate the ‘oligarchs’ from Putin. If the country’s biggest businessmen were kept out of international commerce, went this theory, they would withdraw their political support from him.7
But Western sanctions left a lot of room for the West’s big corporations to continue to trade and invest in Russia, and in another interview in September 2016, this time with Bloomberg TV, Putin was claiming that they were aimed too narrowly to do fundamental harm to Russia:
And it’s totally clear that ten and certainly fifteen years ago we would not have been able to respond to the sanctions that have been imposed against Russia, with countermeasures in the agricultural sector, for example. We could not have closed our market in farm produce to the countries behaving in an unfriendly fashion against us, because we could not have satisfied the domestic market with our own produce at that time. But now we can.8
A month later he assured an audience of foreign visitors that the European Union was losing $60 billion in the value of exports as a result of its economic sanctions against Russia. The real losers, according to him, were the same countries in Europe that were applying them. Russia, he insisted, would survive and flourish.9
Despite lacking economic weapons of equal power, the Russians felt they should at least retaliate with harsh measures against Ukraine. Restrictions were therefore placed on Ukrainian exports of foodstuffs and industrial goods to Russia, and the government in Kyiv was put on notice that it would have to pay in advance for its gas supplies.10 This was done even though it was America and its European allies, not Ukraine, who were imposing the main restrictions on Russian officials, corporations and banks. Russia’s economy required Western industrial and technological imports to continue its course towards technological modernization and integration with global trade, and ministers had to be cautious in applying counter-sanctions if they wanted to avoid hardship or annoyance for the mass of Russian consumers. But they were determined to obtain for Crimea the status of a legitimate part of the Russian Federation, and placed a ban on Western IT companies bidding for Russian governmental contracts if they refused to do business in the peninsula. They also prohibited official institutions from using software such as Excel – a security precaution but also a commercial counter-sanction.11
The keenest of the counter-sanctions were centred on agricultural produce. In August 2014 the Kremlin prohibited farm imports from America and the countries that had joined them in imposing sanctions. America was little affected, with Obama receiving negligible pressure from its farming lobbies. Only 7 per cent of American poultry exports, for example, went to Russia. But the European Union would suffer, because Russia was the second-biggest purchaser of its food and drink exports.12 The Moscow press publicized the banning of Roquefort and other French cheeses from the Russian market, and it was reported that vigilant patriots denounced those supermarket chains that continued to sell them.13 The Kremlin was incensed, however, about the cracks in the wall of their counter-sanctions: Putin complained that Polish meat, vegetables and dairy products were continuing to enter the country,14 when Poland had been one of the fiercest advocates of economic sanctions. Many Russian retailers were importing banned goods by getting them sent through Kazakhstan. Customs agencies on the Russian borders were ordered to tighten up supervision.
As a large country with one of the world’s biggest economies, Russia would not languish as Iran had been doing under the Americaled embargo that came into effect in the early 1980s:15 indeed, speculated Putin, as foreign boycotts continued, Russian agriculture would benefit from domestic demand. He also boasted that Russia’s industrial output had maintained its existing levels of production, and stressed that America’s national debt was higher than its gross domestic product. It was Washington rather than Moscow, was the clear implication, that faced difficulties over its economic strategy.16
The balance sheet of sanctions and counter-sanctions is difficult to compute because it involves so much counterfactual calculus. What is certain, however, is that Russian manufacturing quickly expanded to fill gaps left by some traditional Western imports. The government enhanced the country’s resilience through a strategic campaign of public procurement contracts and of pressure on Russia’s finance houses to give support.17 ‘Import substitution’ became both slogan and reality even though the new domestic output did not always match the standards achieved by the most successful foreign companies. Agriculture did even better than other sectors of the economy, but even for the farming sector it was not a unified picture. Pork and poultry products reported expansion, and cereal production continued to swell, but beef and dairy farms had not enjoyed the necessary capital investment and proved incapable of a rapid increase in output.18 Nevertheless, sanctions had a weaker impact than the American administration had counted on, and indeed in some ways they acted to boost Russian economic independence. They also had the unintended effect of assisting those lobbying for the country’s defence industrial sector. This was hardly the result that American politicians had sought.19
The greatest shock to the Kremlin’s economic prospects, however, came from an entirely different quarter when, in mid-2014, the bubble of hydrocarbon revenues suddenly burst. The new ‘fracking’ technique, involving pumping water into stony deposits to release their petroleum and natural gas, revolutionized world hydrocarbon production, turning the United States into a leading exporter after years of importing its supplies. The growing global glut resulted in a collapse in prices. Crude oil – according to OPEC’s records – dropped from $115 per barrel in June 2014 to around $50 in January 2015. This was not the lowest point: by January 2016 purchasers could buy a barrel for only $31.20 This was a disaster for Russia’s budget. No grandstanding by Putin and Medvedev could disguise the economic pain. Kudrin had warned for years about the need to prepare for the contingency of falling oil and gas receipts, and now suddenly it had come to pass, and the Finance Ministry had to find ways to cope at a time when it was already striving to shield the country from all the other pressures.
Rather than prop up the ruble’s exchange rate by shovelling assets from the country’s financial reserves, Finance Minister Siluanov let the currency float. In mid-2014 the US dollar cost 34 rubles. By the end of the year alone it had climbed to 59 rubles and rising.21 Siluanov knew that if he tried to sustain the old rate, he would be pouring good money after bad, and was also glumly aware that Russian manufacturers, retailers and consumers would have to pay more for imported goods. A fall in the level of the standard of living was unavoidable.22
In the year after the Crimean annexation real wages fell by 8 per cent, retail sales by 10 per cent.23 Gross national product plummeted by 3.8 per cent. Inflation soared to 15.5 per cent across the twelve months. The budget deficit gaped wider and wider, and the Finance Ministry had to make drastic cuts in its allocations.24 Putin’s chronic failure to do much to diversify the economy had had the consequence of mortgaging Russia’s future to the vagaries in hydrocarbon prices, and now the debt was being abruptly called in. It was not as though he was unaware of the dangers of relying upon natural resources as the talisman of national regeneration: he had sounded the same alarm himself. By September 2016 the total assets in the Reserve Fund and a National Well-Being Fund had tumbled to $73 billion, as the government transferred money to deal with its welfare commitments rather than face the anger of those citizens who depended on state payments for utilities, transport and pensions. Putinism’s grand bargain with the Russian people was under heightened strain.25
By November 2016 some other option had to be found, and the anti-liberal side of the leadership found its own increasing ascendancy was saddling it with the task of finding a solution. Since the turn of the millennium there had been an upward graph of state intervention, state control and state ownership. If the liberals were not allowed to go for growth by means of a comprehensive range of liberalizing policies, it was up to Rosneft’s Igor Sechin and other anti-liberal leaders to offer an alternative of their own. This resulted in a splendid irony. In the interests of balancing the budget, Sechin agreed to the selling off of 19.5 per cent of the Rosneft shares that remained in the hands of the state, which at that time owned half the entire corporation – this was the kind of measure economic liberals like Kudrin might have proposed. In fact, Sechin’s move had been planned for years, as a way of raising finance for investment. At a time of emergency, it helped rescue the entire Russian economy,26 and Sechin’s promise to increase the value of Rosneft by gobbling up Bashneft was probably one of the factors that in 2016 had turned Putin against Minister of Economic Development Alexei Ulyukaev (who opposed the move) and towards accepting Sechin’s demand to put him on trial.27
The sell-off of nearly a fifth of Rosneft took place without fanfare, perhaps because the government disliked admitting that foreign buyers Glencore and the Qatari Investment Fund were involved. Putin was renowned for having brought Russia’s natural resources back under governmental tutelage: now he had to explain his about-face in allowing 50 per cent foreign ownership. He did so with chutzpah: ‘Consequently, from the viewpoint of the interests of state, the ultimate interest of state and from the viewpoint of fiscal interests, we have, above all, a positive experience and not a negative one.’28 Such complacency did not fool everyone. The opacity of the deal led to speculation that Sechin and others had ensured their own handsome pay-off. As with other matters of Russian high finance, it was hazarded that nothing was truly as it seemed.29
On 21 December 2017 Putin was upbeat when he met business leaders in the Kremlin: ‘Now a few words about the economy. The period of recession has ended, this is obvious, as you and I can see.’30 The businessmen listened respectfully before filing out. His former adviser Andrei Illarionov sceptically pointed out that though there had been an upturn in the first three quarters of 2017, this was followed by a fall – and a fall that, if continued into the following year, would indicate the resumption of recession. Manufacturing, mining, energy production, construction and even agriculture had declined, and Illarionov reckoned it was foolish to pretend that the prospects were rosy.31 No one in government could seriously present the Rosneft share sale as any more than a palliative for the country’s economic woes. A more fundamental revision of policy was required. Kudrin continued to demand this from outside the cabinet; Putin and Medvedev ignored him. Rather than devising a programme of reform, the authorities continued down the road of devouring existing financial assets. On 1 February 2018 the Reserve Fund was closed down and its remaining assets lodged with the National Well-Being Fund.32 Welfare was not the sole drain on the sovereign wealth funds. The Finance Ministry also had to help with existing projects of national importance. Gazprom, Rosneft and other gigantic hydrocarbon corporations had been pushing ahead with costly projects to exploit new fields.
But it would be foolish to write off the Russian economy. Oil and gas continued to be exported abroad, including to countries such as Germany that were applying economic sanctions. Arms and other military equipment remained a huge source of profit for Russia’s state-controlled factories, just as they had been in the Soviet period – and there was no downturn in the world market price for tanks, missiles and machine guns, unlike the hydrocarbon sector. Arms exports by 2013 gave Russia more than a quarter of the global market, with only the United States staying ahead of it.33
The Russian ruling group stuck to its usual economic practices without substantial amendment. Despite the straitened budget, ministers went on making generous loans to foreign countries. In 2017 the Finance Ministry’s official in charge of international credit, Konstantin Vyshkovski, revealed that Russia had committed itself to $70 billion of such lending. On average, the country handed out $3 billion in new loans every year in the decade from 2007. Nine-tenths of the total amount in loans to foreign beneficiaries was committed to contracts for nuclear power stations. Next in line were defence contracts and the civil aviation business34 – among the few branches of industry in which Russia excelled enough to find buyers beyond its borders. The Kremlin was doing what it could with its available resources. It wanted to show it still had a growing role to play in the world economy even after the juddering impact of Crimea and the hydrocarbon price collapse. Russian leaders were holding their heads high.
But Russia’s financial assistance to other countries had been provided according to political criteria: not an entirely happy process. As the price of winning support in Venezuela, Russia had to forgo $900 million in failed repayments by 2017, and by early 2018 the political protest movement against Nicolás Maduro’s administration was putting at risk billions of dollars of Russian investments in the country. Venezuela joined a line of hopeless debtors such as Cuba and North Korea, whose loans had had to be written off years ago. To avoid further losses in its international dealings the Finance Ministry revised its rules for future loans – and now the solvency of potential debtors is examined in advance.35 The only surprise is that it has taken this long to introduce some common sense. Other credit operations have turned out more successfully, especially for the Rosatom nuclear agency’s contracts to build civilian fuel plants in China and Hungary. Whereas the Chinese deal was struck in 1991, it was not until 2014 that Hungary accepted Moscow’s offer of a thirty-year $11.7 billion loan to finance Rosatom’s project to expand a Hungarian nuclear plant.36
The Russian leadership also aspires to an increase in foreign direct investment in Russia itself. Any commercial contract he has played a part in sealing makes Putin glow with pride, as happened in 2012 when the American Exxon Corporation signed an agreement with Rosneft for the expansion of the Russian oil industry. Putin personally endorsed the construction of factories by the Boeing Corporation, which buys Russia’s aluminium for its aircraft production lines and employs many Russian citizens.37
After 2014 such investment plummeted, in the previous year having stood at a peak of $69.2 billion. Two years later it was down to $6.9 billion, a reduction of over 90 per cent.38 The foreign companies that made most money in 2016 from operating inside the Russian Federation were led by the French retail giant Auchan. Metro Group came next, followed by Japan Tobacco Co., Philip Morris International, Toyota Motor Corporation and IKEA, Volkswagen, PepsiCo Holdings, Mercedes Benz, Leroy Merlin Procter and Gamble, and British–American Tobacco.39 IKEA and Leroy Merlin built new mega-stores, and Mars, Pfizer and PepsiCo also expanded their operations.40 Hypermarket chains from abroad have established a particularly strong hold in Moscow, St Petersburg and the biggest cities. Car manufacturing has grown in Russia, with German and Japanese firms leading the way – the American company General Motors had a presence until 2014, when it pulled its production facilities out of Russia as the recession deepened.41
The commercial risks of investing in the country are known in advance, and they are considerable. Boards of directors are told about them by their governmental ministries, even if they fail to read the sad stories that have appeared in the Western media ever since Russia rejected communism. They know the rule of law is only fitfully applied, and that the Russian government and Russian business lobbies frequently transgress legal procedure with impunity. Incoming companies have prior knowledge of the difficulties of red tape, bribery and corruption. Nor is most of the transport infrastructure up to high international standards. But the situation is improving: in 2012, according to the World Bank, Russia came 120th in its global ranking of the easiest countries in which to do business. By 2017 it had risen to 40th place. But for a country that has a pressing need for an influx of foreign firms and foreign investment, this was still not satisfactory.42
Most of the German companies stayed on if they had already made capital investment in Russia. They had spent their money, and hoped to see out the economic recession and international political tumult. In several regions the local Russian authorities made efforts to create a favourable climate for further business. Tatarstan and Kaluga actively courted the Germans with incentives that included special economic zones with land, buildings and tax concessions; they also promised to cut the usual red tape. The German Foreign Office lent support.43 The result was that in 2015, according to the Russian-German Chamber of Foreign Trade, there were still 5,583 registered German companies operating in the Russian Federation, only 7 per cent fewer than in the previous year.44 By June 2017 Putin was able to voice his pleasure that sanctions had failed to induce Germany’s firms to pull out. While the Germans made big profits from Russian activities, the Russians in turn were benefiting from access to German technology: trade had risen by 40 per cent in the first quarter of the year. Putin asked why Germany would ever want to stop importing Russian fuel at a time when Norwegian and British hydrocarbon reserves were approaching the point of exhaustion – ‘Well, where’s it going to come from?’ Russia had trillions of cubic metres of gas in the Yamal peninsula, and wanted to continue its ‘absolutely natural partnership’ with the Germans.45
Russian ministries and banks searched for new sources of finance to surmount the difficulties, but met with little readiness for cooperation in Shanghai, Hong Kong or Singapore. In 2015 only 10 per cent of foreign loans to Russia’s businesses were raised in Asia.46 The reasons were predictable. Creditors are wise to choose their largest debtors with caution. The long arm of the American legal system had been extended to act against those foreign commercial institutions that did business in both the United States and Iran in defiance of the American economic sanctions against the Iranians imposed in the 1980s and 1990s. Savage fines were levied by America’s federal courts, and had to be paid on the nail if the accused banks wanted to continue dealing with American banking corporations or their overseas financial partners. Chinese and other east-Asian banks and investment firms were circumspect about the risk of attracting attention from America’s judicial system.
Global finance was known for its lack of sentimentality. No Asian government had reason to feel sorry for Russia, anyway, for its record against Asian peoples was a bloody one, from the mid-nineteenth century in central Asia and China through to the war against Japan in 1904 and on to the invasion of Afghanistan in 1979. Though the Russian Empire and the USSR were no longer, memories remained of what the Russians had done. After 2014 the Asian political and financial response to Russia’s overtures was implacable: the Kremlin had got its country into an impasse and would have to find its own way out. If Moscow’s ruling elite were to reduce its readiness to deploy its armies abroad, Asian powers would have reason to celebrate.
Whereas the level of foreign investment in Russia has fallen, Russian trade with the outside world has risen; the sanctions and counter-sanctions applied since 2014 were not aimed at cutting all commercial ties, only those specified in decrees. American officials continually emphasized that Washington never introduced a comprehensive embargo. In December 2016 US Ambassador to Moscow John F. Tefft recounted the delight he took in enabling American companies to start operations in Russia.47 Even so, the total volume of exports of goods from the United States to the Russian Federation in 2013 had been less than 0.1 per cent of America’s gross domestic product. Aeroplanes and cars were the main items, followed by engineering products, medicines and medical instruments. In the same year the United States imported Russian goods – almost entirely raw materials – valued at only 0.2 per cent of America’s gross domestic product. It was almost as if the USSR had not collapsed and the Cold War was still on. Russian private investors had largely steered away from investing in the United States: Americans held only $70 billion in long-term Russian securities and had only $14 billion in direct investments in Russia.48
This trend inevitably deepened with the introduction of economic sanctions. By 2016 Russia’s bilateral trade with America amounted to only $20 billion, whereas the Sino-American total was $600 billion,49 which meant that China headed Russia’s import trade. Germany was still in second place, but fell back in total volume. Next came Belarus and the United States, at half even the German level. Exports from Russia the same year had the Netherlands at the top of the list. Close behind the Dutch were the Chinese, followed by Germans, Italians and Belarusians.50 The breakdown of the Russian export trade in 2016 was as follows: Netherlands 10 per cent, China 9.8 per cent, Germany 5.8 per cent, Italy 4.9 per cent, Belarus 4.9 per cent, Japan 4.8 per cent, United States 4.2 per cent. This meant Europe as a whole, if Ukraine and Belarus were included, made up 52 per cent of the market for Russia’s exports.51
In 2016 a gentle economic recovery began in Russia. There were people with ready cash despite the recession. With nearly 31 million new purchases of smartphones, Russians bought more of these than any other European nation. Samsung was the market leader, recording 22 per cent of sales, but Apple did well for itself, taking a third of the Russian smartphone market by value, thanks to the high price of its products. Chinese companies Huawei, ZTE and Lenovo had success with cheaper products.52 After the turn of the millennium there was a steady rise in Russian steel production, whereas Britain’s, France’s and Italy’s steadily fell away.53 The general picture remained what it had been for decades: Russia sold natural resources such as petroleum, gas, coal and aluminium, while buying cars, medicines, computers and aircraft.54
But the impetus Kudrin and his supporters had provided for economic reform had faded. Objectives such as the rule of law, so important for commercial transactions, were honoured only in the breach – one of the fundamental reasons why foreign companies were not more active in Russia. But the ruling elite refrained from introducing the necessary reform. Years of huge hydrocarbon revenues had lulled the Kremlin into a state of complacency.
Inside the elite, however, there was growing nervousness. In June 2015 Sergei Ivanov, serving at the time as Putin’s Chief of Staff, admitted to the Financial Times that ‘in the 2000s, when we had very high oil prices, the motivation for carrying out structural reforms and diversifying the economy was not very high’.55 After both Crimea and the oil price crash the incentive could not have been greater. In October 2015 Putin rejected the criticism that no progress was being made.
Yes, this process is moving slowly. Is something positive happening there or not? Yes, it’s happening, and here’s something to illustrate this. Let’s say that if the share of the oil and gas sector in Russia’s gross national product five or seven years ago was 14 per cent, today the share of the oil and gas sector in the Russian Federation’s gross national product, in the country’s economy, is 9 per cent.
He contrasted Saudi Arabia and Venezuela and their failure to escape from the grip of hydrocarbon dependence.56 Few independent economists agreed with his analysis. There was little sign of reform. The Russian leadership continued to sit tight and hope for better times ahead.
They were cheered when hydrocarbon prices began to rise again. From the lowest point at $27 a barrel for Brent crude oil in January 2016, there was a climb to $69 in September 2018 – still only half the peak price in 2008, but the easing of the Russian budget was very welcome. Inaugurated for his fourth presidential term in 2018, Putin issued a new set of May Decrees, which outstripped those of 2012 in their promises to improve life for everyone in the country. Now Putin wanted Russia to rise to the place of the world’s fifth largest economic power, and be in the front rank of producers of information technology. National infrastructure was to be strengthened; so would welfare commitments be. He had said little about any of this during his election campaign, if only because he had not bothered to do any campaigning. These May Decrees were announced from on high by a ruler confident in his unchallengeable power. The historical resonances with communist party secretaries abruptly revealing ambitious programmes to transform conditions in the USSR were unmistakable.
Were the ambitious May Decrees simply impracticable? As Kudrin pointed out, everything depended on continued high prices for oil on the world market. Putin had brought back Kudrin to head the Audit Chamber, from where he could exercise financial oversight of the decrees. Kudrin did not mince his words. As the Eeyore of official policy, he warned that the tightening noose of sanctions foreclosed Russia’s opportunities to raise external funds to renovate Russia’s oil extraction and refining capacity.57 Russia needed assistance for shale extraction as well as for deep-sea drilling and Arctic exploration, as the Siberian fields were approaching exhaustion, a source of anxiety for the Kremlin. In May 2014, not long after Obama announced his Crimean sanctions, Rosneft signed a deal with Exxon Mobil to look for sources beneath the bed of the Arctic Ocean. In America Exxon Mobil was fined $2 million, and by February 2018 had concluded that projects with Russian companies were no longer practicable. A bad result for the American corporation; an ill omen for Russia.58
In 2018 judicious analyses forecast a mere 1.5 per cent annual increase in gross national product in forthcoming years.59 This would not turn Russia into an economic power of the first rank. In his end-of-year press conference Putin put a brave face on it. The sanctions, he said, had had the beneficial effect of compelling the country to use its own resources. Economic development had progressed. Agriculture had led the way, but industrial manufacturing was no longer far behind.60 These were the usual official declarations of intent, but the outcomes were less conspicuous than the bragging.