1/2/19
It’s not even 48 hours into 2019 and the headlines in Russia paint the picture of a frustrated, unhappy place. Russia has lost faith in itself, trust in its leaders and hope for a future that doesn’t include it being isolated from the Western world in which they feel they are a part. Western sanctions that began in 2014 due to Russia’s incursions into Ukraine hurt the economy, by Vladimir Putin’s own admission. The economy turned inward, relying less on imports the Russian state-sanctioned in retaliation. Agribusiness boomed, but even the farmers aren’t all that excited about Russia these days. Blame the government. Less than 50% (46% to be exact) of agribusiness managers surveyed by the NAFI Research Center said they trust the government. If only 46% of people from a sector of the economy that is both subsidized by the government and the biggest beneficiary of sanctions cannot be abundantly positive on Moscow, who can? The oil and gas industry is, once again, all Russia’s got. It adds credence to the late Senator John McCain’s depiction of Russia as nothing but a big gas station. Putin mostly took it on the chin when he passed pension reform. Entitlement changes and tax increases are precisely where the angst mainly comes from. Don’t believe the op-ed writers who say that sanctions and Putin’s militarism are finally irking the Russians. It’s not. It’s less money in the bank and the prospect of working later in life that’s hurt Putin's approval rating.
Then there is the same old story of Russian economic reform. Privatization has gone nowhere fast. Russia investors have been hearing the same stories for at least ten years now. The ease of doing business in Russia is on par with that of Kazakhstan. For a country that was once a world power, this should be a bit embarrassing, but hey ... good for KZ! Some of the laundry list of complaints include state railways for their shakedown of the locals on rail prices and numerous “useless buildings of the century.” Messaging app Telegram is still banned in Russia, but Russians manage to use it via virtual private network logins that make computers look like they are based elsewhere. The year begins with a lousy real estate market, too. One of the bigger disappointments for the government has been the housing market. The rate of housing construction fell substantially in 2018. A planned 86 million square meters on the books turned into 11 million square meters instead. “The (Russian) government is not going to catch up with the West,” he wrote on December 28, just three days before the start of a new year. “Maintaining GDP growth rates higher than the world as Vladimir Putin spoke of in his decree back in May is merely a tribute to Russia’s past. You have the Ministry of Finance and the Ministry of Economy quietly predicting a GDP growth ceiling of 2.5%–3% for many years,” he says. Ceiling being the key word here. Russia is a country lowering its expectations. “We will develop as we can,” Butrin says. “How are we going to catch up with countries who imposed sanctions on us? This year we have seen a more consistent development of Russian relations with China, and that is very good for us. But China will not solve the strategic problems of Russia.”
