Staunton, July 8 – Carelessness, corruption, and neglect are “penetrating the most important branches of the Russian economy, a development which entails enormous risks in aviation, energy and highways,” Vladislav Inozemtsev says, and that represents an increasingly serious threat to Russia’s future development.
In a commentary on RBK.ru yesterday, the head of the Moscow Center for Research on Post-Industrial Society, says that these shortcomings affect not only things inherited from Soviet times which the Russian economy continues to depend on but also those built since, whose quality is no better (daily.rbc.ru/opinions/economics/07/07/2015/559a86919a79472ad2d31d2a).
Most of this reflect the efforts of bureaucrats and businesses to boost their own incomes, but it also is a product of the large number of intermediaries who never have to bear responsibility for the shortcomings of what they do, Inozemtsev says. Such problems are endemic in Russia, but recently they have been hitting “ever more dangerous branches.”
Typically, when people speak about Russia’s problems, they mention roads. That is not inappropriate, he says. Russia has to spend far more on maintenance than do European countries and thus has less money available to build new roads. Turkey, for example, spends 9.5 times less on reconstruction than on building new, allowing it to increase its network dramatically.
But Russia is forced to spend more than twice as much on reconstruction as on new roads, because its highway technologies are so backward relative to Europe and because the entities involved in highways make far more money when they are rebuilding old roads than they do when they are constructing new ones.
Many people see this as almost inevitable and ignore its broader consequences. Russia has to spend more than twice as high a percentage of its GDP on transport than does the US, Inozemtsev says, and “about half of the victims” of traffic accidents die precisely because of the “horrible quality of the roads.”
Another critical area concerns space and air transportation, he says. A series of accidents involving Russian rocket motors in 2014-2015 has “attracted attention” to this branch, especially because it is quite clear that the accidents continue to happen because problems already identified have not been corrected.
“The authorities have begun to talk almost about sabotage and wrecking,” but that isn’t where the problem lies, Inozemtsev says. The problem lies with the fact that in that sector, most firms are monopolies which face no competition and less than adequate supervision from the authorities.
One statistic is particularly telling: Russian components form only 30 percent of all those in Russian satellites and rockets, but they are responsible for 95 percent of the problems. There is no way that import substitution will do anything, at least in the short term, other than make the situation worse.
Similar problems infect the aviation sector, he continues. In 2014 alone, there were 22 aircraft accidents. Most were blamed on “the human factor,” the Russian term for “human error.” But that doesn’t explain the problem completely. Many times, planes crash or can’t be used because the parts installed in them don’t work or can’t be readily replaced.
But perhaps the area of “greatest concern” involves the energy sector. Not only does Russia lose 3.4 times as many miners’ lives each year than does the US and 9.7 times more than the EU, but today “more than 80 percent of the capacity” of hydro-electric and steam-powered power plans are using turbines built “before 1980.”
Many are inadequately serviced, and that has led to disasters which have in some cases cost lives. The situation with regard to atomic power plants is no better, especially because there are so many different firms involved that no one of them is likely to be held responsible when problems arise.
The country’s electric power grid is aging and collapsing. Seventy-percent of the power lines are now older than their projected lifespan, and in some regions, that figure is “much higher,” Inozemtsev says. In Kaliningrad, for example, the power grid is in such bad shape that a planned atomic power station won’t be able to connect with it without a major upgrade.
In all these cases, and others besides, Inozemtsev says, “the bureaucrats have an answer: extend the life of the resource.” But one can do that only so long as everything wears out. “Under conditions of Western technology sanctions, a weak ruble, and limited credit resources, it is naïve to hope” that this situation will be corrected anytime soon.
But even within those constraints, Moscow is failing to block “the creation of artificial problems which are capable of stopping the development of entire branches” of the economy. Unless it does so, the future of Russia will remain dire indeed.