Russian businessman and economist Dmitry Potapenko on looming economic crisis in Russia

Posted on 11 August 2022



Notable Russian businessman Dmitry Potapenko, a staunch critic of Russian economic policy, shares his view on looming economic crisis which is to hit Russia in the nearest future. Discussing Russian production, relationship between Turkey and Russia, and attempts of the Russian Federation to avoid Western sanctions.

Translation by Anastasiya:

Original video is found here:

Central Bank of the Russian Federation quote: “Economic crisis resulting from the military invasion of Ukraine by Russian Federation will be a long-lasting one… Russian economy will resume its growth only in 2024… consumers, that ceased buying new products, are to blame…”.


Dmitriy Potapenko on the economic crisis in Russia:


The Central Bank (CB) should not expect any increase of domestic buying/consumption that would stimulate Russian economy. Moreover, there are no other consumers, as the international exports were halted due to sanctions. At the same time, CB fails to stimulate internal industry sector. For example, the CB is not giving enough credits to industry and companies.


It’s also worth reminding that if the CB and Russian leadership should not be under delusion that energy, metal, gas&oil and chemical industries could survive under the current sanctions. All these industries are either stopping their operations or have already cease their operations. The carmaking factories in Russia, like IzhAvto (Lada Izhevsk), are no longer operational and are trying to force its employees to voluntarily terminate their contracts.


Moreover, we cannot rely on high fossil fuel prices to compensate and provide all the people who lost their jobs not just with money but, most importantly, with employment. These people will not spend money that they haven’t earned yet to stimulate our economy.


People in Russia lost two things: believe in the stable future and employment. The situation is bad and it’s getting worse.


Meeting between Turkey and Russia


In the past, Russia called Turkey “the sick man of Europe” [The Ottoman Empire before WWI]. Yet, the roles may be reversing nowadays.


This, now second meeting with Erdogan, is a curious historical allusion. Indeed, Russia had several wars with Turkey in the past. There were bloody wars. Even recently, we declared Turkey kind of an “enemy” after they shot down our pilots [in Syria]. Now, Russia started a new conflict, and we are trying to make peace with Turkey and use Turkey to solve our problems.


Firstly, the grain deal that benefits mostly Turkey (and not China, as many were predicting). Being a member of NATO, geographical location and fast decision-making by Erdogan led to a political and an economical win.


Secondly, publicly, there were no discussion on weapons in Sochi, but it was discussed in the first meeting in Iran. There is some information that around 50 drones were supplied by Iran and some sources indicate that they may be a Turko-Iranian drone. This is a curious situation, with Turkey potentially supplying arms to both sides of the conflict. Moreover, if the historical allusions are to continue, and Russia is indeed taking over Turkey’s place of “the sick man of Europe”, we may fear that if Russia follows this path, it will naturally lead to a military defeat.


Erdogan is using this situation to solve internal problems, such as inflation in Turkey and nearing re-election, by playing peacekeeper and dealmaker solving international problems. Time will show it he is successful, as we may also expect a stand-off with China over the economical gains from the war. In this context, Russian Federation must understand that both Turkey and China are looking for an economical and political gains for themselves and cannot be reliable, lasting international partners.


Russian movie theatres and film industry


With the exodus of Western movie-making companies, some movie theatres in Russia announced a new “cinema product”. The consumer would by a ticket not to a movie that cannot be legally imported to Russia, as the moviemaker left the Russian market, but to a séance of a “cinema product” that would include, for example, a Russian cartoon, followed by a Western movie for which the movie theatre does not have distribution right. This proposal was scrapped shortly after the announcement.


Indeed, this is a curious occurrence as it reminds us of the practice in movie theatres in USSR where you would be watching a Soviet cartoon, a report or a short movie before you could actually watch the movie that you wanted to see in the cinema.


This proposal was scrapped not because the Russian movie theatres are concerned with the legal aspect of piracy or don’t want to offend Western movie companies, such as Disney, Marvel, etc., but for a technical reason. All the instruments and equipment for the cinema theatres are Western-made and imported to Russia. The first attempt to illegally screen any movies in Russian cinema theatres would lead to a complete embargo on sales of cinema equipment to the Russian Federation. On top of that, all these systems, like Dolby, and the maintenance are made in the West, and Chinese alternatives simply do not exist.


All these new “products” and schemes that Russian Federation is trying to implement to survive under the sanctions are reminiscent of the USSR. I would recommend to anyone who is nostalgic about the USSR to watch the news and satire from that time as it gives a good understanding of the functioning of then “second-world-economy” and can enlighten you on why it ended the way it did.


This reminds me of a book that you told me about titled “On the defence of capitalism”. As I commented then: something that is functional doesn’t need to be defended. Similarly, it is useless to defend something that is destructive and has disappeared by itself. I would be happy to defend a socialist economy if you could show me one that actually works.

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