You left Russia in 2013, Vladimir Putin is one of the reasons why you co-authored a book with Daniel Treisman about modern dictators. However, were you surprised that Russia attacked Ukraine?
I have never had any illusions about Vladimir Putin’s moral compass. A month before the war began, I wrote to the Financial Times that such a war would be neither short nor victorious for Russia, and in the past few days I have been convinced that there was no turning back for Putin. Game theory is useful for evaluating such situations: if you want to bluff, the terror scenario must be large enough to be credible. I was no longer surprised when it happened.
It was a great shock to many people in Europe that war is possible in Europe. Why is it also so difficult for business and political representatives to admit that they were wrong with Putin?
Reasonable people must be almost shocked to realize that whether you think Putin is a good or a bad man, this war is a big mistake. Nobody in Russia is happy about that, it hurts the regime.
In your book you explain that for a long time Putin was what you call a “dictator”: a dictator who does not rule with fear, but secures power and approval by pretending to be free, allowing some opposition and also free media. . Now this is clearly different.
Putin did not necessarily want to change the model of his dictatorship. After all, he started the war because his acceptance rates had dropped so low and he knew from previous wars that they would bring him more approval again. If the war in Ukraine were as short and successful for Russia as the annexation of Crimea in 2014 or the Georgian territories in 2008, it would continue the country as before. Maybe that worked. But Kyiv withstood the attacks. And Putin responded by banning Western social media, imposing penalties that marked the end of free media, and imprisoning people even if they protested with a placard without words. He resorted to severe repression.
At the latest, when Russia annexed Crimea, countries like Germany should have challenged their energy policies.
Should the West have reacted differently to the annexation of Crimea at the latest?
The West should be much more aware that Russia is not a democracy. Above all, however, much harsher action should have been taken against the way in which Russia sought to interfere in Western elections and institutions through corruption. With the Ibiza scandal, you in Austria are a very good example of how plausible it was for Russian oligarchs to try to buy Western politicians and then do good business.
In 2014, however, there were financial sanctions against Russia. So they were adjusted very gently?
In any case, then they could look very different. By then, Germany and Austria should have challenged their energy policies. We all remember that Greece’s irresponsible fiscal policy ended in a euro crisis. We now see how irresponsible Germany’s energy policy was, which relied on Russian gas as a cheap transition technology.
Those responsible for this in Austria say that Russia was a reliable supplier and that Russian gas was the cheap alternative, because nuclear energy was out of the question. At the same time, there was a belief that economic interdependence would make any war very expensive. Was it naive?
This approach, called “trade change”, which is also based on making other countries more democratic, does not have to be naive. With such commitments, however, you must be clear that you are not dealing with democracies and you must take extremely strict anti-corruption measures, because they are spreading fast. And whoever has relations with a country like China should not allow it to take over international institutions like Interpol.
But the West has allowed Russia to become part of Interpol.
Until recently, Russia also participated in the UN Human Rights Council, of which Saudi Arabia is a member.
However, in your book you support the non-severance of relations with non-democratic states, not even financially.
It is not easy to find another way to promote democratic developments. When the number of well-educated people increases in non-democratic countries, which is encouraged by economic growth, then spin dictators find it increasingly difficult to manipulate people. Such relationships thus increase the opportunity for change that comes from the societies themselves.
The EU must also recognize that Hungary is no longer a real democracy but a dictatorship.
With Victor Orban, there is a very successful dictator with a twist in the middle of the European Union, who has just won the election again by a landslide. How should the EU deal with the fact that it violates Central European values?
The EU must also recognize that Hungary is no longer a real democracy but a dictatorship. The opposition does not have a fair chance. But the EU has awakened and is committing its financial resources to complying with the rule of law. Orbán was extremely good at using EU pots. Three per cent of the Hungarian budget is made up of EU funds, and the Hungarian economy has also grown by exactly 3 per cent over the years. Orbán knows how important EU money is for his country, so it is a lever for enforcing rules. Another important institution is the European Public Prosecutor’s Office, which has been active since 2021 and is intended to deal with corruption cases. The Orban regime gives it a lot to do, but it needs even more resources.
Should a non-democratic country remain part of the EU?
Orban has well recognized that Europe believes that post-communist societies are so happy for democracy that they would never vote for someone like Orban. The EU must wake up. By the way, this also applies to NATO, which includes Turkey, which is ruled by Erdogan.
Both Victor Orban and Recep Tayyip Erdogan are very successful players in international relations.
They are great dictators. They play a game, they are opportunistic, you can not ask them questions of ideology. They present themselves as democrats, but in this way they manipulate international institutions.
In your book you show that spin dictatorships are much more successful today than dictatorships based on total oppression, violence and repression. We see with Orban and Erdogan how democrats have become dictators, but can dictators also become democrats?
They are more likely to be replaced by Democrats. Ecuador, for example, has been more democratic since spin dictator Rafael Korea was voted down in 2017, and Armenia is also on the road to true democracy from 2018. In Venezuela, on the other hand, dictator Hugo Chavez followed Nicolas Maduro, another dictator based on repression.
The current situation means that companies are increasingly wondering under which schemes they should and can operate. In Germany, for example, there is a debate about how the relationship with China should be assessed now. As an economist, how do you feel about that?
Orban attracted business to Hungary precisely by pretending to be a democracy. Putin followed the same strategy. Many companies have left Russia on their own because the country is at war and the risks are enormous. They also no longer want to be associated with the regime. Austria’s Raiffeisen has not yet left Russia, but their jobs there, of course, have been ruined. When companies invest in dictatorships, they must be aware of the danger that things will turn out as they do now in Russia. They should have taken this risk into account by 2014 at the latest. The fact that such risks are now attracting more attention will change globalization.
Putin will fall, but it is not clear how this will happen or when.
Businesses, too, have long assumed that starting a war and alienating the international community would simply be too costly for Russia.
Other dictatorships learn from the current case how expensive this can be. China will think very carefully about the attack on Taiwan. It is now clear that Russia will no longer attract Western investment, and the severity of economic sanctions is also evident. The Russian economy is completely cut off.
The hope of economic sanctions was and is that they will lead to the formation of resistance to the war in Russia. Is this predictable?
Putin will fall, but it is not clear how this will happen or when. Poor Russians groan under rising prices. Middle-class people have lost their jobs in IT companies or consulting firms. The country is in its deepest recession since the 1990s.
Europe has now decided on an oil embargo, but is reluctant to impose a gas embargo. Germany in particular raises two questions: Can an embargo really stop the war and is it therefore justified to weaken the domestic economy, fuel inflation and allow unemployment?
Germany fears protests such as the French yellow vests, which campaigned against the slight increase in fuel prices by Emanuel Macron. You need to ask yourself this question. But it is also very clear that Russia is intensifying the war, that it is raising its stakes again and that every euro that Europe pays goes to war.
So would an embargo end the war faster?
Putin needs the money because the Russian economy is dead and he has to pay soldiers to go to war. The war is extremely unpopular in Russia. The army recruits young people from poor areas, promising 2,000 euros a month and 100,000 euros for the family if the soldier dies. Will an embargo change Putin’s attitude towards the war? no But it would severely limit its resources. It does not have to be a complete embargo.
A tax could keep part of the money and later use it to rebuild Ukraine. In any case, Italian Prime Minister Mario Draghi was right when he said that Europe had to choose between air conditioning and peace.
However, the higher the inflation, the faster the support for Ukraine decreases. Some are already demanding that the eastern territories be ceded to Russia for peace to prevail.
It is difficult to say how and when such a change of mood will occur. We saw in the French elections that Marin Le Pen went up in the polls as prices went up, even though her party was funded by Russia.
What war scenario are you expecting at the moment?
It will last a long time, but as an icy conflict. Ukraine will not surrender the eastern territories, but will not be able to regain them. But this does not mean that the reconstruction of the country can not already begin. In fact, it should.
Sergei Guriyev, 50, head of the New School of Economics in Moscow, was one of the financial advisers to Russian President Dmitry Medvedev (2008 to 2013) and to the supervisory board of Sberbank. In 2013, he fled to France over allegations that were allegedly made by the Putin regime. He has been the Chief Economist at the European Bank for Reconstruction and Development and is Professor of Economics at the Sciences Po in Paris.
Interviewing is the trend. EDITION received on June 10, 2022.