Foreign Affairs

Russia Today: Bleak Times Ahead

The eye-catching skyscrapers in Moscow’s business district are undoubtedly impressive. One of the tallest structures in Europe, Evolution Tower, which spirals upwards in the shape of a double helix, harbors a surprising secret. More than a third of it is empty. When oil prices were high, GDP was soaring, and President Vladimir Putin’s approval ratings were at their peak, the Russian government envisioned the new business district as the booming hub of a dynamic economy. However, as Moscow’s empty skyscrapers demonstrate, those predictions have failed to materialize. Over the past four years, the economy has contracted and stagnated, consumer confidence has fallen, and disposable income has shrunk. Observers debate the ability of this seemingly fragile system to survive the rapidly approaching day when its patron, Vladimir Putin, no longer occupies the presidency.

After the economy performed poorly following the collapse in oil prices, domestic critics were quick to point out that the Russian economy was beset by two fundamental weaknesses: an overweening dependence on commodity prices and a lack of diversification. At the same time, Alexander Navalny, one of the Kremlin’s fiercest critics, argued that the government had to subordinate itself to the rule of law and abandon the arbitrary exercise of power it has become infamous for. When Putin predictably assumed power in 2012, he dismissed calls for these vital structural reforms to the economy and the political system.

Russia’s current economic position brings to mind the stagnation of the mid-to-late Soviet period under the premiership of Leonid Brezhnev. It had become increasingly clear by the end of his tenure that the Soviet system was hopelessly inefficient and could no longer deliver high-quality, sustained growth. Until Gorbachev introduced perestroika and glasnost, Brezhnev’s successors faced the dilemma of reforming a deeply flawed system that they had championed. Gorbachev’s reforms were incompatible with Soviet politics, and the country collapsed in 1991.

Putin’s narrative of the Soviet Union’s collapse boils down the failure of Brezhnev’s successors to preserve the system that had earned his country superpower status. Now faced with similar charges of stagnation, he does as he believes Gorbachev ought to have done: resist. Consequently, the system Putin built during the years leading up to the collapse in oil prices has calcified around him. Anyone with power in Russia derives substantial financial gain from the country’s current political order. For all its savvy on social media, any meaningful opposition exists on the fringes of Russian politics and will likely wield minimal influence in selecting Putin’s successor.

Putin’s secrecy and lack of close confidants make it nearly impossible to guess the name of the individual who will succeed him. However, since all of the potential candidates are beneficiaries of the current illiberal order, the likelihood of a reformist succeeding Putin is vanishingly low. Even if a figure like Alexander Navalny successfully takes office, he would have to possess the political stomach and skill to discipline an unruly FSB, battle entrenched interests at every level of government across the country, and introduce economic reforms that would inevitably compromise those at the top of the food chain. This task would require an unbelievable degree of coordination and take years to accomplish, making reform anytime soon an unlikely prospect. Because of the mountain of hurdles facing anyone seeking to challenge it, the system Putin built will likely outlive him.

A handful of factors could challenge the viability of Russia’s political system, the biggest of which is the price of oil. John McCain wasn’t completely off the mark when he disdainfully called Russia “a gas station masquerading as a country.” Petro-dollars sustain Putin’s kleptocracy, and a prolonged, significant drop in the price of oil could tank the Kremlin’s ability to keep important mouths fed. Another foreign intervention followed by more sanctions could severely limit Russia’s potential for growth. However, barring this unlikely combination of circumstances, Russian kleptocracy will likely survive the upcoming transition of power.

Horribly mismanaged, the Russian economy will continue to deliver largely unimpressive results into the foreseeable future. According to locals, public officials have become so brazen that many demand bribes simply to perform their duties. Absent even modest efforts to tackle corruption, the average bribe grew by an eye-popping factor of 26 from 2008 to 2011. The cost to the economy is extraordinary; according to the World Bank, corruption consumes as much as 48 percent of GDP per year. Just last year, the International Monetary Fund downgraded the country’s forecast for average GDP growth per year from 2019 to 2023 by half a percentage point to 1.4 percent, a number that is largely consistent with quarterly data since 2015. The World Banks’s 2018 Economic Report on Russia, “Modest Growth Ahead,” predicts that Russia will remain a low-growth country well into the next decade. Until then, don’t bother visiting Moscow’s business district. Nobody’s home.

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