In conjunction with the Carnegie Endowment’s International Economics Program, the Moscow Center’s program monitors and analyses short- and long-term trends in the Russian economy, including macroeconomic developments, trade, commodities, and capital flows, and draws out policy implications for Russia and the post-Soviet space. The program also focuses on Russia’s integration into the global economy, with particular emphasis on trade, including in hydrocarbons and other commodities.
Authors of more recent studies almost unanimously state that even though it’s unclear whether the resource curse generally menace on average over the group of resource-rich countries, it definitely threatens nations with weak institutions.
Achieving economic diversification in countries dependent on oil exports is a major challenge. Most diversification strategies have failed, and there are no examples of countries that have successfully managed to fully diversify away from oil.
Between the end of World War II and the mid-1960s, the Soviet Union’s economy was one of the most vibrant in the world. The country had successfully launched the first man into space and was competing with the United States in developing cutting-edge military technology. However, by the end of the 1980s, the economy was in a miserable state.
Having found itself in a lose-lose situation, the West will most probably do nothing—keeping sanctions in place and freezing the situation. The Kremlin will be happy. Russia won’t stop meddling in Ukraine or give up Crimea.
Russia faces bleak economic prospects for the next few years. It may be a case of managed decline in which the government appeases social and political demands by tapping the big reserves it accumulated during the boom years with oil and gas exports. But there is also a smaller possibility of a more serious economic breakdown or collapse.
The budget clearly illustrates its authors’ thinking. They fear popular discontent and so don’t want to risk taking unpopular steps. The regime’s main goal is short-term stability, so it keeps supporting the paternalistic governing model, which is increasingly trapped in the cycle of social spending.
Trade relations between the EU and Russia will likely remain stable for many years, even as the overall volume of bilateral trade gradually contracts. The EU will grow less dependent on Russia for energy security, while Russia will become less reliant on European finance, industry, and infrastructure.