Roger Altman, the investment banker and former deputy U.S. Treasury secretary, said Russian President Vladimir Putin is more vulnerable than people realize to sanctions that will test his population’s patience.
“A lot of people misunderstand how profoundly weak Russia is,” Altman, the co-founder of Evercore Partners Inc., told Bloomberg Television’s Betty Liu in an interview Wednesday, citing a declining population, a hobbled banking system and a currency that has lost about half its value. “Russia is on the edge.”
The country is facing higher borrowing costs in global markets amid U.S. and European Union sanctions after Putin’s annexation of Crimea a year ago. Russia doesn’t expect to access international debt markets next year after ruling out issuing foreign bonds in 2015 to help finance its budget deficit, Finance Minister Anton Siluanov said Monday.
Altman said Putin is overestimating the tolerance of his citizens as Russia enters its first recession since 2009, hurt by oil prices trading at a six-year low and sanctions tied to the Ukrainian conflict. The Economy Ministry estimates gross domestic product will fall 3 percent this year.
Putin “apparently has a view that the Russian people have a long and sad history of deep suffering and that is essentially an unlimited capacity for suffering,” Altman said. That assumption may be incorrect, he said, noting that Russia is more integrated with the global financial system than North Korea.
“There is a point at which Russia, at least theoretically, could not function and would have to seek concessions,” Altman told Liu. “That point could be, for example, a banking collapse and obviously a further currency malfunction. It’s not inconceivable if we were to tighten the sanctions further, and Europe were to agree to sign on to that, that they could actually force Russia to bend.”