One of the most challenging problems for modern Russia is just how economically, politically and socially vulnerable it has become. There is only so long that a country can be run on the basis of extractive industries by an elite that depends on the grace and favour of the man in charge and the tolerance of a public fed on a heady diet of extreme nationalism.
Russia depends very heavily on oil, gas, gold, timber and other raw materials. The oligarchs who have been granted the licences to extract those products do very nicely indeed out of the arrangement and live in some very sought-after areas on the outskirts of the two largest cities. For many years, under British governments of all stripes, the richest oligarchs were able to buy up second homes in London, where they could focus on laundering their money and stashing it safely away from any fall from favour.
Russia’s vulnerable economic model
Over dependence on extraction is an incredibly vulnerable economic model. Some of the regimes that are most heavily dependent on oil and gas revenues are making conscious efforts to build sections of their economy that can survive the coming end of fossilised economies. Russia is much less well-placed.
As more businesses, more individuals and more countries recognise the gains in investing in energy saving, energy storage, solar, wind and other renewables, the demand for oil and gas will begin to decline. Supply of fossilised energy is relatively fixed. When demand drops and supply doesn’t, the price of what is supplied almost always falls. Any drop in the price of fossil fuels will hit Russia hard because they come from some expensively inaccessible places.
The revenues that are available to the Russian state have already dropped as they are forced to sell their products at a discount because of sanctions. The long-term trend over the next few decades is likely to be that those revenues will fall further. The days of easy money being available to buy loyalty from a narrow elite are unlikely to last long. Nor is it likely to be easy to maintain decent employment opportunities or a level of public services that the wider population is prepared to accept.
Moscow’s no-hope estates represent Putin’s failure
The centre of Moscow is filled with shiny office blocks and swanky apartments and gives the impression of a highly prosperous international city. Go to the outskirts or to the smaller cities and it can be a very different story. Bleak apartment blocks and no-hope estates dominated by drug abuse border onto decaying remains of long-closed heavy industry.
It is this fundamental core of weakness at the heart of Putin’s operation which is often misunderstood. He didn’t organise the invasion of Ukraine out of strength and confidence in the future. It stemmed from weakness and insecurity. He needed a distraction from the consequences of building the domestic economy on an unsustainable model.
A limit to loyalty
For a while this has worked. Patriotic pride is very strong in Russia and it isn’t difficult to evoke the memory of the ‘Great Patriotic War’, the siege of Leningrad or the glory days of the post-war Soviet Union, when Russia played the leading role in a block of nations that in the 1950s stretched from China to Poland and from Lithuania to Ukraine.
Yet despite a tightly controlled media pumping out a message of Russia defending its interests against the untrustworthy and aggressive West, there is a limit to loyalty. It is worth remembering that millions of Russians shared the footage about the luxurious way the Kremlin elite lived put out by Alexei Navalny before he was jailed for refusing to die. Gold toilet brushes for some is deeply unpopular in Russia.
It is also important to remember that millions of Russians have family and friends fighting in Ukraine who can communicate directly with them about what has happened. A lot of Russians will be very uneasy about the death of Prigozhin in a convenient plane crash and hundreds of thousands of young people fled abroad to avoid the draft. Body bags coming home, injured ex-soldiers returning to tell of disorganisation and poor equipment and the local convicted murderer arriving back in the community to lord it over their victims aren’t things that build popularity.
Hope for the future stifled by a controlling and insecure regime
An economically declining state, with an insecure power system at its heart that is struggling to extract itself from a bad war, is not likely to be top of the list of successful nations over the coming decades. Already the birth rate in Russia is desperately low, as women vote with their bodies on the amount of hope for the future Putin is providing for a mother and child.
Is there hope for the country? If so, it lies in the strong science base, a highly educated population and a creative sector that has been punching above its global weight for a century and a half. But that hope is being stifled by a regime that needs to control information and is scared of free speech.
Unless the country manages to free itself from oppressive rule by a single individual who struggles to understand the modern world, the future looks bleak. Russia risks encountering a long and unpleasant deterioration, as oligarchs, generals and directors of special military forces vie to take over control of assets that decline in value, whilst the wider population becomes increasingly cynical and hopeless.
Alarming parallels with Britain – and the same potential positives
For Britain there are some alarming parallels in all this. Dependence on oil and gas revenues that come from expensive sources. An over-large finance sector manipulating dodgy money. Ill-gotten gains taken over borders and put into offshore financial accounts. Regions where the transition from declining heavy industry has never been properly managed. A gulf between a wealthy elite and the lived experience of people living in poor housing conditions.
Yet we also share the big positives. We have an even stronger knowledge economy and have an even better track record of punching above our weight in the creative industries. Our own prosperity is not remotely facing the same levels of risk as that of Russia. Nevertheless, it would be wise to learn from their bleak experiences and make sure we don’t go down the same routes.
Nostalgia for a glorious lost empire and over dependence on fossil fuels and the finance sector that goes with it is unlikely to lead to success. Facing up to the future using our creativity, our understanding of science and our willingness to collaborate with others is the way forward both for Russia and for Britain.
