Carnegie Moscow Center
The recent decline in the Chinese stock exchange reveals economic weaknesses that Russia had been trying to ignore. Russia’s relationship to China has too many emotional mood swings and needs to be more pragmatic.
Russia’s oil and gas industry faces long-term systemic problems, even in the unlikely scenario that the price of oil rises sharply again. This has severe implications for the country’s economic prospects.
A new set of economic proposals by Sergei Glazyev defy generally accepted economic theories and historical experience and would probably ruin the Russian economy if accepted. Is there a political rather than an economic rationale to them?
Official statistics suggest that Russia’s oil and gas industry accounts for only a quarter of the country’s GDP. However, when other factors are factored in, the economy is seen to be much more heavily dependent on hydrocarbons. With oil prices looking set to stay low for a long time, this is bad news for the Russian economy.
Putin's visit to China is his first since the West's introduction of sectoral sanctions against Russia. Moscow’s hopes for greater engagement with China have gone unfulfilled. Due to falling commodity prices, sanctions, the volatility of the ruble and the economic crisis in Russia, trade and investments continue to decline, while agreeing on new deals is becoming increasingly difficult.
Putin’s recent theatrics indicate a plan to run for re-election in 2018. But despite his lack of opponents, Russia’s current problems make the path to re-election more complicated this time around.
Chaos in China’s financial markets could have dire implications for the Kremlin’s plans.
Excessive intrusions by the Chinese state to shore up confidence in the country’s financial markets are precisely what led to overheating.
Issues such as the Iran deal, the rise of the self-styled Islamic State, and the spread of Russian military and economic influence continue to highlight the importance of the Caucasus region on the world stage.
The Russian elite and public are propagating certain myths that Western sanctions are not hurting or are even helping Russia's economy. The reality is much bleaker: sanctions are here to stay for a long time and there can be no healthy economic development while they are in place.