Lavrov on New US Sanctions for Russia: No Need for Sympathy, Russia Will be Just Fine, Thanks

Lavrov used to talk a lot about economy. Hard Talk is continuing to publish his recent interview. Let's hear an extract.

Stephen Sackur, host: The US Treasury Secretary is going to announce another set of sanctions against several Russian companies and individuals who are believed to be associated with the Syrian military. The previous set of sanctions was a hard hit for the Russian stock market. Russia's being squeezed.

 

Sergey Lavrov, Russian Foreign Minister: Thank you for your sympathy. But don't worry, we'll make it through.

- Russia may have the most powerful nuclear weapons so vividly described by President Putin but the Russian economy is weak and vulnerable.

- And we know this, but our economy has made it through a lot of challenges starting with the WWII. I assure you, our government and president realize the necessity of reforms and this issue was prioritized by Putin in his annual Address.

- OK. In order to understand what's happening to our economy we've invited several experts who can share their deep understanding of the matter. Some things seem unexplainable though. You've said that the situation at the foreign exchange market would have no impact on the 80% of the population. Let's finally discuss that. So, what happened? Trump's recently tweeted that we were setting too high interest rates, influence the American markets and encumber them with our economic activities. What activities?

Here's his yesterday's tweet. He said we were playing the devaluation game and that's unacceptable. Not "China and Russia" but "Russia and China". Russia stands first. Today, we discovered that at your communist request we're extracting money from our national debt to America. We clawed out some $3 billion from the American prison. And we know that our total us about 100, 96 or 93. And we took a certain sum. What does that mean? It's clear that they are building some economic curtain against us. They want to exclude us from all economic processes. And you want to help them.

Yuri Afonin, member of State Duma: I believe that unfortunately, those $3 billion wouldn't become a trend. I'd like to go back in time. And look who initiated this policy: It was basically initiated by Chubais and Gaidar. I'm talking about globalization...

- Those two again!

- And what happened? We're celebrating the $3 billion we took. But the investments during the crisis year of 2008...

- Who said we were celebrating?

- $30 billion were invested in securities. Next step. During that period, we increased our capital threefold. During that period, the US sharply opposes the will of Crimeans to rejoin Russia. In 2017, the US bombs Syria for the first time and imposes sanctions. At the same time, we pay almost $16 billion for those securities. Unfortunately, the trend of worshiping the Western securities is a feature of our current economic policy. We lack resources to develop our own economy, we encourage our entrepreneurs to invest in our industry giving them loans at 15-20% interest while paying our money to the West and celebrating. Our opponents often say that China invests money. But we must understand…

- Not just China, many countries do. The whole world.

- But the US doesn't consider the whole world to be an evil empire. They consider Russia, China, and several other states.

- But the evil empire occupies the first place.

- Yep, Russia and China.

- I mean China.

-That's why I draw this comparison. The annual Chinese growth rate is 6-7%. In 2015-2016, our economy was in decline. Last year, it grew by 1.5%. And the main thing is that China has a lot of resources that it invests in development. — It was about 2%. — Yes. They invest in development and securities. We desperately need money to fund our development. And we're moving it out of the country. We need to stop working with these financial instruments and get our money back. If the government doesn't invest in industries how will you encourage the private sector to fund it? That's why we need to end this destructive Gaidar-Chubais policy and start funding our economy with our internal resources.

- Nikita Alexandrovich, as a people's economist, could you explain how will our people benefit from those $3 billion?

Nikita Krichevsky, Doctor of Economics: Well, I don't know about the $3 billion, but you should ask the Central Bank that took them.

- Is the sum too small to assess?

- It's not about the assessment, it's about the US public bonds being the most reliable financial instruments in the world, whether we want that or not. This huge list is a proof of that. Everybody invests, not because they have nothing else to invest in but because it's the most reliable instrument. Do we need to invest in our economy? Of course, no doubt. But let's remember that our economy is private, not planned. The government owns less than 50% of it.

Yuri, in 2006-2007 the Investment Fund of the Russian Federation was created to encourage investments. 200 billion rubles were invested in it. The exchange rate was 1 to 25 at that time which makes the sum equal $8 billion. $8 billion! And what happened next? By 2009, 83 of that 200 billion rubles were already withdrawn. And 117 weren't. There were no projects to fund. They would have taken if there had been projects. Recently, the Fund was terminated. Not because it ran out of money, but because nobody wants to take it. I don't know why. Maybe they're more used to stealing. Maybe because there's too much control.

- That's unlikely.

- I'm not sure. Why aren't we investing in Russia? And why, I've been long suggesting this, don't we take, say, $10 billion and invest them in mortgages at the lowest interest? Evgeny dreams of the 6% growth. But tomorrow, we can declare…

- I dream of 3%, Nikita Alexandrovich.

- 3%! Take $10 billion, change them into rubles and refinance mortgage loans. Replace mortgages issued by Sberbank and VTB and get a 2-3% interest rate. But we refuse.

- They promised us 7%.

- Why do we refuse? I'm almost done. Because unfortunately, our government lacks the required skills and expertise. An official comes to work at 9 a.m., has two meetings at 10 and 12, and takes a lunch break...

- How do you know that?

- I just do. And after lunch...

- Nap time!

- They must go to a gym and meet with friends afterwards. No time to contemplate. I agree with Mr. Afonin. Our ideology comes straight from the 90's. The Gaidar-Chubais one. Why? Who approves our economic ideology today? Higher School of Economics, RANEPA the MSU Department of Economics, and TSR. The very same people. The top officials change thanks to Mr. Oreshkin but the puppeteers remain the same. Oreshkin ensured that the generations change.

- Wait for a couple years. You'll get your new government.

- I hope so.

- The Constitution requires that.

- I'm afraid it'll just get reshuffled.

- But what about the people? How do people react to the changing situation in the country? We see global economic upheavals. But will they have an impact on our lives?

Maxim Shein, economist: The exchange rate naturally affects the people because many consumer goods depend on imports. If they depend on imports they become more expensive when the exchange rate gap grows.

- But it changes every week.

- That's the first point. Plane tickets are more expensive now. The intraday fluctuations are tiny. It's important to assess certain periods: a quarter or a year. Secondly, Russians have a certain ideal of stability the predictability of our economy, dictated by the exchange rate the dollar/ruble front. They're not aiming to profiteer by buying those lousy dollars they want to assume that our kingdom remains stable.

- Is it stable?

- Most certainly.

- Speaking about investing in American bonds the idea is to stash money somewhere to be able to finance budget deficit. By the way, speaking about the decline...

- There actually is a strategy of freezing those stashes. We froze the Libyan money, for instance. We took Gaddafi's stash.

- That's why we have 93 billions and not 193 or 993.

- So we can spare 93 billion?

- During the last three years, many countries the major holders of the American debt were selling 40 to 100 billion per quarter. Everybody's been selling because the value of the American debt has been growing. In general, nothing seems to have changed.

- But the graph...

- Everybody understands that the rates of the American debt are going to increase. It might be wiser to get rid of it.

Nikita Krichevsky, Doctor of Economics: And why can't we have a fixed exchange rate so people wouldn't have to do calculations?

- Ever heard about market economy? And Elvira Sakhipzadovna.

- Why can't we be like China?

- Trump's tweets.

Maxim Shein, economist:

- Economic policy.

- This tweet is silly, right? We can't raise any rates.

- The Russian foreign exchange market...

- Never mind, it's weird.

Yesterday, you heard the Deputy Head of Centrobank say that she was analyzing the situation and everything was under control. They are ready to interfere if it's necessary.

Breaking news: our life's getting better. We're currently receiving messages from unspecified sources even though we have to cite our sources. We'll just say it's from RIA Novosti. They're our friends. Putin and Trump might meet before November in a third country if a situation occurs that demands they meet and reach some agreement. Vague but reassuring. 60 Minutes.