Carnegie Moscow Center
There is no reason to expect any serious changes in the Russian economy in 2016. The coming year is likely to see a behind-the-scenes struggle between two special interest groups: those who will profit if industries are nationalized, and those who will benefit from foreign investment.
The real cost of Russia’s current isolation will be felt in the long term: the country will miss opportunities for growth and will continue to stagnate.
Turkey is one of Russia’s strongest trade partners. Imposing economic sanctions on yet another country is likely to hurt Russia itself the most.
The 2016 budget openly declares that Russia will not compete with the rest of the world in science and technology—at least not outside the defense sector. It suggests that the Kremlin has chosen to wait for oil and gas prices to increase (regardless of the likelihood of this actually happen) while continuing to support the military-industrial complex.
Russia is reverting to the same economic level it had fifteen years ago. Small and medium-sized businesses, which could boost the economy, are held back by regulation and corruption. As a major economic catastrophe is unlikely, this state of affairs looks set to continue into the long term.
The proponents of the Petersburg Dialogue believed that cooperation between Germany and Russia would increase stability in Europe. But today expectations are self-deluding.
Since the first Five-Year Plan, the steel industry has been a major engine of the Russian economy. Despite being privatized, market-oriented and relatively competitive, it became burdened with large amounts of debt and may be headed for greater government involvement with the maladies that entails
Russian consumers are increasingly unhappy, but their discontent is being frozen in depression rather than manifested in social protest.
Changing and burdensome tax regulations for the Russian oil industry are deterring foreign investors and causing problems with attracting financing for long-term growth. New proposals by the Finance Ministry, if implemented, would only make things worse.
The parallels between the late Soviet era and contemporary Russia are indeed striking. But is this analogy applicable? Not entirely. To assess Russia’s future we should look not to its own recent history, but to the developments in countries that experienced similar transitions.