Carnegie Moscow Center
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.
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.