As Russian President Vladimir Putin pours weapons and fighters into Ukraine and the West responds with sanctions, the Russian economy appears bound for recession. The latest round of penalties that followed the downing of Malaysia Airlines flight MH17 has left Russia facing unprecedented capital flight, projected to reach $100 billion by the end of 2014 (compared with $63 billion for all of 2013). The ruble, meanwhile, is down 11 percent since November 2013.
But for Russia, things aren’t all bad. Its countersanctions on practically all food and agricultural imports from the United States and the EU are strengthening the country’s position in Eurasia. In fact, the closing of Russia’s western borders to European and U.S. goods could allow Putin to execute a judo flip: turning the West’s blockade to his benefit by using it to seal closer ties with neighboring post-Soviet states and even new partners such as Turkey.
A host of countries on Russia’s periphery reacted with excitement to the Russian ban on EU and U.S. food; its anticipated financial cost to the EU alone is estimated to reach $14 billion a year. Many post-Soviet countries have long struggled to deepen their reach into the Russian market, now wide open to them. For their part, Tajik officials said that they would aim to increase fivefold the fruit and vegetable sales to Russia. Kyrgyzstan’s deputy minister of agriculture went even further, foreseeing a rise in the country’s total Russia-bound exports from 13.5 to 200 tons per year. Armenia, Azerbaijan, and even the autarkic Uzbekistan likewise volunteered to expand their exports to make up for any shortfall Russia faces after banning Western products.
All these countries have struggled to develop export economies based on something other than resource extraction. Many of their best-educated citizens fled abroad after the Soviet collapse, and low productivity, geographic constraints, and endemic corruption have left them unable to compete with the West’s industrialized agriculture sector, much less its modern manufacturing operations. Simply put, a
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