Andrey Movchan explains what lessons Russia can learn from Mexico, the United Arab Emirates, and Venezuela to deal with the perennial “resource curse.”
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.
During a recent media call, Andrew Weiss and Andrey Movchan discussed the current stand of the Russian economy.
Carnegie Moscow Center hosted a discussion on the impact of resource dependency on the economic development of Russia and other major petrostates in a comparative context.
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.
Talk of an impending economic collapse in Russia is misplaced. The Reserve Fund is doing what it was built to do—cushioning the economy from the shock of falling oil and gas prices and giving it time to adjust to new conditions.
In the past, business deals could be secured if Putin endorsed them personally. Now, the Russian president seems to have stopped making promises to anyone; no deal is ironclad anymore.
The Russian government has ambitious plans to rebuild the country’s aviation industry. Despite state subsidies for manufacturers, leasing companies, and buyers, however, Russian planes aren’t selling abroad—even in countries like Iran, with which Moscow has strong political ties.