Carnegie Moscow Center hosted a discussion on the impact of resource dependency on the economic development of Russia and other major petrostates in a comparative context.
Achieving economic diversification in countries dependent on oil exports is a major challenge. Most diversification strategies have failed, and there are no examples of countries that have successfully managed to fully diversify away from oil.
Between the end of World War II and the mid-1960s, the Soviet Union’s economy was one of the most vibrant in the world. The country had successfully launched the first man into space and was competing with the United States in developing cutting-edge military technology. However, by the end of the 1980s, the economy was in a miserable state.
Having found itself in a lose-lose situation, the West will most probably do nothing—keeping sanctions in place and freezing the situation. The Kremlin will be happy. Russia won’t stop meddling in Ukraine or give up Crimea.
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 budget clearly illustrates its authors’ thinking. They fear popular discontent and so don’t want to risk taking unpopular steps. The regime’s main goal is short-term stability, so it keeps supporting the paternalistic governing model, which is increasingly trapped in the cycle of social spending.
The $120 million in cash found in Dmitry Zakharchenko’s sister’s home must have come from some sort of illegal business activity—likely involving the contraband market.
Trade relations between the EU and Russia will likely remain stable for many years, even as the overall volume of bilateral trade gradually contracts. The EU will grow less dependent on Russia for energy security, while Russia will become less reliant on European finance, industry, and infrastructure.
Turkey is one of Russia’s strongest trade partners. Imposing economic sanctions on yet another country is likely to hurt Russia itself the most.
Israel’s economy is very successful, but there are some key problems which act as impediments to the country’s future economic and social development.