The Russia-China Axis: The New Cold War and America's Crisis of Leadership by Douglas E. Schoen & Melik Kaylan

Author:Douglas E. Schoen & Melik Kaylan [Schoen, Douglas E. & Kaylan, Melik]
Language: eng
Format: epub
Tags: International Relations, Diplomacy, Political Science, World, Political Freedom, Geopolitics, Russian & Former Soviet Union
ISBN: 9781594037573
Google: q2ToBAAAQBAJ
Goodreads: 34081690
Publisher: Encounter Books
Published: 2014-09-09T00:00:00+00:00

State of the Russian Economy

“Our key challenge in the coming years is to remove many infrastructure constraints that literally stifle our country and prevent unlocking of entire regions,” said Putin as he announced a decision to tap the country’s pension reserves for a $43 billion loan. The Russian president would use the cash infusion to pay for infrastructure projects that he hoped would pump new life into Russia’s flagging economy.43 The plans included a superhighway in Moscow, a high-speed railway between Moscow and Kazan, and a modernization of the Trans-Siberian Railway. Critics questioned the move, suggesting that Putin’s decision would endanger pension funds and lead to inflation, not economic growth—or at least not growth anywhere near what Putin has envisioned.44

Economically, Putin has made big promises to the Russian people. On returning to power in 2012, he pledged to deliver GDP growth of at least 6 percent annually to keep Russian living standards rising steadily.45 But the IMF has cut projected Russia GDP growth to 2.5 percent in 2013 and 3.25 percent in 2014 because of “weak investment and poor external demand,”46 and Economy Minister Andrey Belousov conceded that a recession might be on the way. The Russian economic boom of 2000 to 2008 has not revived; since 2010, the economy has lagged far below the annual GDP growth target of 5–6 percent that Putin had set. Russia is unlikely to meet those targets in the future. In August 2013, Moscow announced that GDP growth in the second quarter was a paltry 1.2 percent. Putin’s critics pounced.

“I don’t really think the economy is heading toward collapse, more likely long-term stagnation—a lost decade, if you will,” said Vladimir Milov, a former deputy energy minister and now a leader in the political opposition. “This will not lead to an immediate surge in protests, but it will be very difficult for Mr. Putin to stage another successful election in 2018 should the economy be dead.”47

Putin is doing everything he can to prove Milov wrong, and the Russian economy does retain some powerful advantages. Russia straddles two vastly different regions and has a different economic position relative to each. Per capita, Russia is about as wealthy as most of its central Asian, Eastern European, and Asian neighbors, but because of its size, it has a vastly higher GDP than any of these countries: over $2 trillion in 2011.48 With no legitimate rival peers in the region, Russia enjoys huge economic leverage over its relatively weak neighbors. And Russia is trying to expand its economic trade in the Asia-Pacific region, currently about a quarter of its national total (the EU remains Russia’s biggest trading partner). Russia’s Asia-Pacific position is strong in two areas: It is the sole petroleum-exporting region in the trading bloc, and it possesses nuclear expertise unmatched by any other Asian Pacific Economic Cooperation (APEC) nation.49

Russia has pursued economic expansion through smart use of plentiful natural resources, predominately in oil and energy. Russia leads the world in natural-gas production, generating 20 percent of global

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