Staunton, March 16 – Even after the coronavirus pandemic ends, Russia’s economy will not bounce back as many hope not only because of sanctions, the worldwide recession and the collapse of oil prices but because the structure of the Russian economy makes any recovery a virtual impossibility, Vadim Zhartun says.
The Russian business analyst and commentator says that the prospects for the country are so dire that it may even happen that the Russian state will come to an end, not in the sense that Russians will all die but that the existing structures will simply collapse given their inability to prevent economic collapse (zhartun.me/2020/03/swanlake.html).
Up to now, he writes, “all was arranged in Russia quite simply.” Oil and gas were extracted from the ground and sold abroad under the direction of a small group of people defined by Putin. This money went for three things: supporting that part of the population that worked for the oil and gas companies and the government, creating the appearance of economic and political progress through national projects, and supporting siloviki of all kinds.
Private business was marginalized to the service sphere or as a supporter of the oil and gas exporters. But as can be seen, this system had “several inborn shortcomings,” and the current crisis has both exposed and exacerbated them, Zhartun says.
First of all, the system as arranged was very much at variance with Russian laws. That meant that the laws had to be violated. Second, in this situation, the system has had to rely on “the personal devotion” of its participants. And third, it gives rise not only to the possibility of corruption but makes it inevitable and large-scale.
It is obvious, he continues, that “such a system cannot exist forever in view of the objective conflicts of interest and the lack of civilized mechanisms of balancing them (a parliament, courts) that were thought up long ago by democratic societies” and that ensure their stable operation.
Putin’s decision to arrange for himself to be president for live “even more strongly destabilizes the system.” That is because in the absence of clarity about how power will be transferred, the members of the Russian establishment are driven to pursue “a liquidation strategy,” one that avoids thinking about any long-term consequences for the country.
That has the effect of deepening the country’s dependence on oil and gas whose prices are falling, leading to ever more illegal export of capital, and making it almost impossible that the Russian economy will develop any other modernized sector. The coronavirus pandemic will only exacerbate all of these things.
To see where Russia is and will be if things continue as they are, one must consider the following package of its unfortunate characteristics: an economy weak and bled dry by sanctions, dependent on raw materials exports at a time prices for these are falling, and an elite that seeks to save itself even at the cost of the country’s future.
“In such conditions,” Zhartun says, “any domestic political excess may lead to a chain reaction; and after April 22, the probability of that will only grow. After any mobilized voting, the ratings of the powers fall – people do not like to feel deceived and raped,” and they have the additional complaints arising from the handling of the coronavirus pandemic.
According to the economic analyst, this means that “the probability of the destruction of the system is very high, that the period of the fantastic luck for the Russian authorities is coming to an end, and that in 2021, Russia has ever chance to enter as an entirely different country than it is today.”