Carnegie Moscow Center
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 Obama administration must realize that no “foreign policy” issue will matter as much to global economic, political, and ultimately security conditions in the coming year as whether the United States can demonstrate that it is able to deal with its economic crisis.
While Vladimir Putin is unlikely to give up power any time soon, the political and economic system he created is incapable of dealing with Russia’s rapidly changing conditions. Crises are likely unavoidable unless Russia changes and modernizes.
Russia’s recovery from the global economic crisis has been slow, constrained by a number of economic and political structural problems. Until they are resolved, these issues will continue to hinder Russia’s development.
While the obsession with global rebalancing stokes currency and protectionist tensions, it diverts attention from what is really needed—reforms at home.
While Russia’s short-term economy will largely depend on oil prices and the country’s demographic challenges, its medium-to-long-term outlook will be influenced by the lessons that leaders take from the crisis, which will affect Russia’s economic structure and policies for many years to come.
The Euro crisis, which strikes at the heart of the world’s largest trading block, no longer threatens just Europe. Economies around the globe are already being affected, and the worldwide recovery is at risk.
The Santiago Principles and the commitment of their sponsors—some of the biggest sovereign wealth funds—are an important test for the viability of new forms of global governance.
Russia's system of government administration is inefficient, unable to cope with both a transition of political power and the economic crisis at the same time. To ensure its own survival, the Russian regime must modernize itself.
The hydrocarbon industries of the former Soviet Union are undergoing innovative development. In Russia, conditions both enable and inhibit the construction of a new economy focused on incentives for innovation.