Russian Economy Shows Little Sign of Improvement

July 8, 2016Russiaby EW News Desk Team

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Russia’s GDP failed to improve as lower oil prices and Western sanctions hamper growth. Oil prices increased in the past year, but not enough for Russia to secure economic prosperity. The Moscow Times notes that the ruble strengthened to over 60% compared to the dollar, but has failed to enhance the economy thus far.

President Vladimir Putin has maintained a strong resolve as his country suffers economically, and Moscow continues to weather the storm. Russia’s problem not only lies with lower oil prices and persistent Western sanctions over Crimea, but the Chinese slowdown as well.

Moscow pivoted to the East in reaction to wrath from the West, but China’s economic setbacks have dampened Putin’s efforts to strengthen his economy using Beijing. Further, Russia’s ESPO benchmark crude has failed to gain a stronger foothold in Asia, and Saudi Arabia’s push to maintain its market-share has hurt the Russian energy sector.

Russia’s fate is also tied to the West, especially with the Brexit situation. Prime Minister David Cameron has maintained a hardline stance when it comes to Russian sanctions, and Britain’s departure from the EU could lead to some leniency on Moscow. Moreover, Germany could favor fewer restrictions on Russia for the sake of the business community.

Sanctions have prevented Germany from continuing various trade and business deals with the Russians, and there are growing calls within Berlin to rekindle ties with Russia. A stronger relationship between Moscow and Berlin would secure the necessary investment and trade needed to offset shortfalls in the Russian oil sector.

Russia is one of the world’s top oil producers, but the energy sector has suffered numerous layoffs. The government, however, is trying to save as many jobs as possible. For example, Moscow is attempting to prevent auto firm AvtoVAZ from laying off its workers while asking employers to take other measures, such as reducing salaries, notes Stratfor.

The government cannot afford additional layoffs in other sectors as higher costs and lacking opportunities place added stress on the citizenry. Moreover, officials fear some blowback during fall elections, as voters could respond by voting against incumbent politicians, and officials fear a diminished presence in the Kremlin if elections do not swing in their favor.

Putin has ridden on a wave of nationalistic fervor, as Western sanctions have unified much of the populace, but the same cannot be said of politicians in the Kremlin. Politicians running against the established order face an insurmountable battle ahead, however.

For example, the establishment is determined to minimize the opposition using unscrupulous tactics if the pendulum swings away from incumbents. Further, the opposition does not have its act together, as various political opponents are involved in sex scandals and violent incidents.

Russia’s opposition has been severely degraded due to Putin’s iron grip, but alternative leaders are gaining additional support as the economy withers, especially as the government exercises greater authority. Putin’s policies grow more repressive, and the president must consolidate power at a time when Western powers seek his ouster through internal rebellion. Despite Putin’s troubles, he is projected to win the 2018 presidential election.

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