On the heels of Canadian Prime Minister Stephen Harper’s visit to the United States, Energy & Environment Program Associate Director Mihaela Carstei joins CTV to discuss the Keystone Pipeline project that would transport tar sands oil from Canada and the northern United States to refineries in the Gulf coast of Texas.
A great deal of the Western press coverage of Vladimir Putin’s re-election was optimistically devoted to proclaiming the end of Putin(ism) due to swelling protests, the rising middle class, demographic decline, and stagnation in Russia’s high-cash, low-growth, oil-dependent economy. Nonetheless, it is not a given that Putinism will recede to make way for greater democratization.
Russia‘s demographic and economic problems leave the state and society vulnerable to shocks that will more likely lead to backlashes with a centralizing and anti-democratic character. The evidence, so far, reveals that when backed into a corner, the response by Russian authorities is not towards meeting the needs of the people, but rather entrenchment and coercive measures taken to quell any challenge.
The demographic trends in the Russian Federation are of strategic concern. The United Nations Population Division revised earlier projections for the 21st Century with new global models extending to the year 2100. The Russian Federation’s projections reveal significant contractions due to low and declining fertility rates, high death rates, falling life expectancy, increasing levels of disease, alcoholism, drug abuse, and a high level of emigration. From 2000 to 2010, 7.9 percent of Russians emigrated; some of them among the best-educated Russians who are stifled by the continuation of a corrupt and stagnant regime that they believe will not change.
Russia’s population peak was in 1995 at 148.7 million and according to the UNPD’s medium-level projections, it is expected to fall to 126 million in 2050 and to 111 million by 2100 – numbers with which they will struggle to control their vast landmass. The problems surrounding this long-term contraction are amplified by the ethnic and religious dimension. While ethnic Russians are a minority in the landmass of the former Soviet Union, they are just below 80 percent in the Russian Federation and this ethnic balance is shifting against native Russians. This threatens human security as it raises the likelihood of a nationalistic backlash which could form a significant anti-democratic force in Russian society.
Structural Economic Problems
Without significant economic reform, Russia’s over-dependence on the energy sector - despite questionable economic rationale - may lead to its irrelevance. Even with high oil prices, the increase in government spending is likely to outstrip revenues. While the average growth of Russia’s economy between 1999 and 2009 was around 5 percent, Russia is exceptionally vulnerable to price shocks in the energy sector, and has suffered greatly from the global economic crisis, with GDP contracting 7.9 percent in 2009. The great indirect effect on Russia was a flight of capital, estimated to be a net withdrawal of $38.3 billion in 2010, and a total of $225 billion in the period 2008-2010. Recovery after the crisis was slow in Russia at +3.8 percent, compared to Brazil +7.5 percent, China +10.3 percent and India at +8.3 percent. Several foreign banks have closed their Russian branches or sold them to Russian businesses or other players. The dominance of the state, political, economic and social instability have greatly affected competition and the general investment climate. This mixed centralized-market model manages the economy inefficiently, with large banks favoring the state, further proliferating corruption in Russia’s state sector.
Without restructuring expenditure will eventually have to be cut as Government spending continues to outstrip oil revenue. Without budget cuts or a raised debt ceiling, inflationary pressure will begin to impact the limited savings of the middle class, causing a drop in living standards and a further incentive for emigration.
Under Putin the liberalization and restructuring needed to diversify Russian’s economy are unlikely to take place and until now there has been little evidence top down approaches to economic development and diversification work. The small elite of KGB-alumni are less than accommodating in letting their economic and political dominance give way to a rising middle class. Despite Medvedev’s attempts to create a Russian Silicon Valley, it may simply not be worth it when a better life can be found elsewhere. The Russian Silicon Valley will therefore remain, for the foreseeable future, in Silicon Valley.
A Coming Backlash?
Demographic and economic structural factors are combining in a way that threatens Russia’s long term growth and will increase the social challenges as immigration and emigration restructure ethnic and religious cohesion. Russia’s demographic decline is an important destabilizing factor, and acts as a multiplier to ethnic conflicts. Both the risks of ethnic conflict and a wider nationalist backlash put great stress on an already fragile democracy – adding uncertainty to a precarious environment for investment and innovation.
Putin’s staged/managed re-election was met with disappointingly weak responses from the US State Department and the international community. It has been a widely held view in Russian defense circles that the combination of NATO’s eastward expansion, the installation of missile defense capabilities in Europe, Western support for Georgia, the mission in Afghanistan, the American outreach to India, the integration of the Chinese and American economies, and the US-Japan alliance are a concerted and deliberate Western effort to encircle Russia. Add to this the Iranian election protests of 2009, the Arab spring, and the civil war in Syria – Russia’s friends have fallen or are under siege. In response, Russia has gone all-in to support for Syria (for domestic, financial and geopolitical reasons), delivering a large arms shipment this January with a measure of deception.
A Russian lawyer told us that Russia is the one nation where a governing political philosophy is based on the premise that things are going to get worse. This is in contrast to the slow, comfortable decline of Europe or the boundless optimism of the American dream. Russia knows it faces a slow, uncomfortable decline, and for that reason, the potential harm that they can inflict from a position of weakness should not be underestimated. Putin and Putinism are not going away any time soon.
Benjamin Bilski and Joanna Buckley are members of the Young Atlanticist Network.
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