Economic Statecraft
2023: Stabilisation After the Shake-Up 

The turning point is behind us, Russia is living in new conditions of confrontation and is coping with them. Russian politics has moved from crisis mode to the new normal, writes Valdai Club Programme Director Ivan Timofeev.

The main result of 2023 has been the transition to a new normal in foreign and domestic policy. In comparison, 2021 was a year of gathering clouds. At the time, an impending rupture was in the air, but to many it seemed unlikely. The reality of the thirty years since the end of the Cold War - the reality of peaceful life, openness and cooperation - had become too familiar. In relations with the West, it began to wind down long before 2021.

Cracks began to appear in the late 1990s, and since 2014 the rupture has become increasingly irreversible. But as it often happens, it is difficult to believe in the possibility of big changes precisely because the inertia of everyday life hides the signs of tectonic shifts. Now they are clearly visible and seem as natural as the past. But in the past, few could have believed in their onset. Last year, 2022, was a year of dynamic chaos - Russia’s transition to a new reality both in politics and everyday life. The nerve of change was the emergence of contradictions in relations with the “collective West.” The concentrated expression of the crisis was the Special Military Operation (SVO) in Ukraine and the subsequent chain of confrontational events: the acceleration of the arms race, NATO expansion, large-scale sanctions, attempts to isolate Russia, military and financial assistance to Ukraine, etc. The stake for 2022 was the question of whether Russia survives the turning point - will it keep the economy from collapsing against the backdrop of unprecedented sanctions, will it conduct large-scale military operations that are incapable of gaining the support of both the elites and society at large? Last year ended with unanswered answers to these questions; 2023 added certainty. The turning point is behind us, Russia is living with its new conditions of confrontation and is coping with them. Russian politics has moved from crisis mode to the new normal. What are the parameters of this normality?

The first parameter is relations between Russia and the West. In 2022, they shifted towards acute confrontation. Its features were large-scale military and financial assistance to Ukraine, NATO expansion, and a course towards the remilitarisation of Europe. The year 2023 showed that NATO countries fear a direct military conflict with Russia due to the risk of nuclear escalation, but they do not see increasing the quantity and quality of weapons supplied to Ukraine as a big risk. The supplies include both Soviet-era weapons and ammunition which had been sitting in warehouses, as well as Western-made weapons. However, the increase in such supplies is still limited by financial and industrial capabilities. Given the prolongation of the conflict, these restrictions can be overcome over time. In any case, the West does not see increasing supplies as a red line. Ideologically, Russia and the West have become fundamental rivals for each other. There are no visible compromise solutions to their contradictions. Both sides expect to impose their terms on each other. The West hopes to do so by exhausting Russia with sanctions, providing direct assistance to its military enemy, waging an information war and influencing countries which are neutral or friendly to Russia. Russia hopes to do so by inflicting a military defeat on Ukraine and solving the tasks of the special operation, as well as by responding with asymmetrical measures. The parties do not have the ability to crush each other, but count on the emergence of favourable opportunities for winning.

The West believes there are vulnerabilities in the Russian economy and relies on the theoretical possibility of internal upheavals, which could lead to a radical change in foreign policy and the defeat of the country. Russia believes in the multiplication of conflicts in which the United States and the West as a whole are forced to get involved, scattering their resources, as well as the likelihood of disagreements within the West.
The new normal is the absence of visible prerequisites for compromise.

The second parameter is the military situation in Ukraine. The year 2023 began with alarming expectations of a Ukrainian counter-offensive. It was fuelled in the information field and in political statements by Western leaders. The success of the offensive was, among other things, to justify large-scale military and financial investments from Ukraine’s Western partners. The failure of the offensive can be considered one of the key military results of 2023. The Russian army did not force immediate retaliatory offensive actions. However, its pressure extends along the entire front line. Western diplomacy now has rational reasons to test the waters for ceasefire negotiations, although officially the positions have not changed. Moscow, on the contrary, has no urgent reasons to agree to a ceasefire. A respite will allow Ukraine to re-arm, increase the capacity of the military-industrial complex and restart the conflict at a moment favourable to Kiev. Apparently, Russia believes that only a painful and large-scale defeat of Ukraine can lead to the consideration of Russian demands and interests. Moreover, such a defeat can be considered both in the mode of a crushing blow and in the mode of a struggle of attrition. The second option, apparently, is the basic one.
The battle of attrition is another sign of the new normal.

The third parameter is sanctions against Russia. The year 2022 was marked by a sanctions “tsunami”, when a wide range of restrictive measures were introduced against Russia in an extremely short period of time. It was about blocking sovereign assets and blocking financial sanctions against systemically important companies, about export controls, bans on the import of oil, petroleum products, coal, steel, gold and other goods, about transport and other restrictions. In 2023, all these measures were expanded. They caused damage, but they could no longer crush the economy. The shock effect remained in 2022, giving way to a plateau in 2023. The US, EU and other initiators of sanctions are improving the system for combating sanctions circumvention. Secondary sanctions are being introduced and criminal cases are being opened against violators, including against Russian citizens. However, these measures do not radically enhance the effectiveness of sanctions. At the same time, Moscow has not expressed any interest in raising the issue of easing sanctions in response to political concessions.
Ignoring sanctions and adapting to them, combined with targeted responses, are part of the new normal.
Economic Statecraft
Sanctions and the Confiscation of Russian Property. The First Experience
Ivan Timofeev
The practice of confiscation modifies the very Western idea of sanctions. It currently implies, among other things, that the “behavioural change” of sanctioned persons would result in the lifting of sanctions and the return of property. However, the confiscation mechanism contradicts it. Sanctions now become exclusively a mechanism for causing damage, writes Valdai Club Programme Director Ivan Timofeev.

In 2023, new doctrinal foundations of Russian foreign policy were formalised. One of the key events was the emergence of a new Foreign Policy Concept. Among the innovations are the concept of a state-civilization and the perception of the outside world as a set of civilizational formations with varying degrees of political consolidation. In theoretical terms, this is one of the most serious innovations of recent times. This view has its strengths and weaknesses. A serious theoretical and political-philosophical study of the new approach is required. But the very fact of its appearance speaks of the beginning of a movement in rethinking Russian identity, answers to the questions “Who are we,” “who are we not to be,” and “who are our significant others?”
The transition to a new normal is characterised by the emergence of new concepts that reflect such normality.

Changes are also taking place in Russian society. The year 2022 was characterised by shock and confusion after the start of the special military operation. This state of affairs was inevitable given the radical nature of foreign policy changes. In 2023, Russian society appears to have adapted to the changes. Despite the ongoing large-scale military actions, Russia has generally maintained a stable and fairly predictable way of life. Alarming symptoms such as inflation, labour shortages and recession in a number of industries are combined with record low unemployment, the rapid development of new market niches after the departure of foreign companies, as well as the revival of industry against the backdrop of import substitution and military orders. The situation within the country remains stable, which serves as an important psychological factor for society. The rebellion attempt in June and its failure showed the stability of the political system. Adaptation of society to new conditions is also part of the new normal.

How long will the new normal last? What new forks await us in the future? How exactly will Russia pass them? All these questions remain open. For now, it is clear that the shake-up of 2022 has been compensated for by the stabilisation of the year 2023. Ahead lies the accumulation of forces to go through new forks.
Economic Statecraft
Russia-West: Rising Stakes
Ivan Timofeev
Underestimating the will of the Russian leadership to restore statehood and prevent a zero-sum game in the post-Soviet space was a major miscalculation. With each new crisis, the West did not take into account the realistic worst-case scenarios in which Russia would defend its interests by force, playing a counter-game to reform the post-Soviet states, writes Valdai Club Programme Director Ivan Timofeev.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.