Carnegie Endowment for International Peace
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Watching the drama of Russia’s private banks collapsing one by one naturally triggers fear: of more than 3,000 registered banks, about 2,600 have already lost their licenses. After the bailout of Otkritie and BIN, the government’s share in Russia’s banking system assets exceeds 80 percent. Fixing Russia’s banking system requires addressing the deep and systematic flaws in the central bank and the financial sector at large.
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.
There is no reason to expect any serious changes in the Russian economy in 2016. The coming year is likely to see a behind-the-scenes struggle between two special interest groups: those who will profit if industries are nationalized, and those who will benefit from foreign investment.
Turkey is one of Russia’s strongest trade partners. Imposing economic sanctions on yet another country is likely to hurt Russia itself the most.
The 2016 budget openly declares that Russia will not compete with the rest of the world in science and technology—at least not outside the defense sector. It suggests that the Kremlin has chosen to wait for oil and gas prices to increase (regardless of the likelihood of this actually happen) while continuing to support the military-industrial complex.
China’s ambitious plans for a new Silk Road of railways, highways, and pipelines are driven by both domestic economic needs and geopolitical ambitions. Russia and the states of Central Asia have yet to make a substantial input into the project.
Since the first Five-Year Plan, the steel industry has been a major engine of the Russian economy. Despite being privatized, market-oriented and relatively competitive, it became burdened with large amounts of debt and may be headed for greater government involvement with the maladies that entails
Russian consumers are increasingly unhappy, but their discontent is being frozen in depression rather than manifested in social protest.