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This economic boom cannot be sustained, and is a house built on sand |
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Putin’s success is simply the luck of the geological draw |
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Russia
is the world’s number two oil producer and number one natural gas
producer |
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Global prices for oil quintupled between 2002 and 2008 |
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The global commodity boom cannot be sustained indefinitely, and will
inevitably be followed by a slump |
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There is little sign that Russia’s political and economic
institutions are prepared for such a development |
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The surge in oil revenue has produced a spike in consumer spending,
largely satisfied by imports, but has not stimulated a recovery of
Russian manufacturing or agriculture |
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The lion’s share of the wealth has been siphoned off by the
oligarchs who are investing most of it abroad |
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The second major beneficiary of the oil boom has been the Russian
state, which has doubled the ranks of bureaucrats and tripled
spending on the military |
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The state has reasserted its control over key industrial
corporations, especially in the oil sector, leading to the emergence
of a new hybrid form of state oligarchic-capitalism |
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The climate remains difficult for small business development, with
small firms accounting for only 17% of employment compared to 60% in
the US |
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Despite ambitious plans to diversify the economy and build on
Russia’s technological and human capital, Russia has shown little
sign of being able to compete in cutting-edge industrial sectors |
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A
downturn in oil prices will expose the shaky foundations of Russia’s
development model |
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Only a small proportion of the oil receipts are trickling down to
the mainstream of Russian society |
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The ranks of the poor and disenfranchised will continue to grow,
leading to political challenges which Russia’s authoritarian regime
is ill-equipped to handle |
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Two decades after the collapse of the Soviet Union, Russia is still in
a state of transition from the failed model of the past to an as yet
uncertain future |
