Russia has many difficulties due to the war, sanctions and international isolation. But there are important factors that could help president Putin's regime survive for much longer than the West would like and even rebuild its military. Don't count on Russia's weakness or instability, says economist Janis Kluge in a column in The Moscow Times. Instead, plan for the long term: tighten sanctions and increase support for Ukraine.
Transport of Russian oil. Photo Wikipedia commons
by Janis Kluge
Russia’s war on Ukraine and Western sanctions are putting unprecedented stress on the Russian economy, its military and its political system. As the late Wagner leader Yevgeny Prigozhin’s failed mutiny shows, drastic change could come at any moment.
At the same time, there are a number of important factors that could help Russian President Vladimir Putin’s regime survive for much longer than the West would like, and even allow Moscow to rebuild its military in the coming years. It is important to consider these factors, not as a reason to throw in the towel or seek an elusive deal with Moscow, but to understand the challenges that may lie ahead for the West, Europe and Ukraine in particular.
Economically, the country is going through a very peculiar crisis. While Russians have lost their chance at a more prosperous future, the regime is still rich. Moscow can count on billions of dollars in export revenues to continue flowing into its coffers in the next years. Even in the miserable first half of 2023, Russia earned over $200 billion, more than enough to cover its import needs.
Export revenues and semiconductors
Even if the G7 oil price cap worked perfectly, Moscow could still expect export revenues of around $400 billion per year. As long as global oil markets remain tight, the West does not have much room to manoeuvre. It would take a more severe global economic downturn to change that.
The global oil market gives Moscow high revenues
Russian industry is still fully dependent on Western technologies, But despite sanctions, it is also still able to import many critical components that it needs to manufacture weapons. China has come to Moscow's aid, passing on large amounts of Western dual-use goods such as semiconductors to Russia. While some newly produced Russian weapons have become less sophisticated, the country’s main problem seems to be ramping up production capacity quickly. Finding machines to build new production lines is harder as a consequence of sanctions, but production is not choked off by a general lack of components or materials.
Living standards
Another element of Russia's crisis is a severe labor shortage caused by a long-term demographic crisis combined with the short-term effects of mobilization the emigration of many skilled Russians. With fewer qualified workers available, Russians might be able to benefit from more job vacancies and higher salaries. At least in the bigger cities, Russia’s population is close to being fully employed. Living standards are lower than they were before the war and will continue to erode as the government prioritizes arms production over social spending.
Russians have still something to lose
From the point of view of many Russians, there are still personal economic opportunities (or necessities) that give them a reason to ignore politics and focus on their careers and family life. It also means they will think twice about voicing their discontent, as they still have something to lose.
With the war came more censorship and harsher repression. Some of the most active members of Russian civil society have left the country or been imprisoned. The war has deepened the atomization of Russians, who now have to be careful voicing their opinion about Ukraine, even to friends and colleagues.
Cynical elites
The war has also been effective at disciplining Russia's senior officials. Even technocrats who were visibly shocked when the full-scale invasion began are now mostly concerned about avoiding a Russian defeat. In the new reality created by the war, they see Putin as their best shot at collective survival.
There are hardly any scenarios for a post-Putin, post-war Russia that would appeal to these cynical elites. The war crimes, destruction and death Russia has brought to Ukraine are irreversible. Together with the Ukrainian territories Russia has unilaterally annexed, they make compromise or restoration of relations with the West and lifting sanctions impossible for a very long time.
Technocrats see Putin as their best shot at collective survival
Internationally, Russia is mostly isolated from the West, and the ICC warrant for Putin’s arrest severely limits the president’s international mobility. Putin has little choice but to ask the leaders of much less-developed countries such as North Korea and Iran for their help by supplying munitions and drones.
At the same time, most non-Western countries are strongly opposed to isolating Russia completely. Interest in diplomatic forums that include Russia, such as BRICS, has increased. Even if it is mostly symbolic, it is also a statement against Western attempts to isolate Moscow.
More importantly, Russia has received economic aid from different sides. While China is helping Russia gain access to Western technologies, Saudi Arabia's oil production cuts are a timely boon for Moscow, keeping its oil revenues high despite oil sanctions.
The time factor
Finally, the Russian regime itself is still very much concerned about its resilience and seems to avoid taking excessive additional risks. Similarly to the years after the annexation of Crimea in 2014, Moscow could follow escalation and mobilization with a more conservative period, giving it time to strengthen its economy and military while trying to normalize some external relations. The longer it drags out the war, the more likely it becomes that the world’s attention will drift elsewhere.
Russia has dramatically increased spending on its Armed Forces, accepting the resulting increase in debt and inflation. But the Kremlin has stopped short of fully militarizing its economy, spending less than 10% of GDP on the Armed Forces. Putin seems wary of going 'all in' in the short term, lest his system be overwhelmed.
The West should not ignore the possibility that Putin will still be in power in five or ten years
None of the factors described above guarantee long-term political stability in Russia. Putin is bound to make mistakes, just as he has in the past. The notoriously opaque nature of the Putin regime makes it impossible to predict how long the Russian system will remain stable in the face of its current challenges.
But the West should not ignore the possibility that Putin will still be in power in five or ten years. Russia may also gradually overcome bottlenecks in arms production. This scenario could be very threatening for Europe as a whole, much less Ukraine.
Sanctions are crucial
In the longer term, constant escalation is still the fuel that Putinism runs on. Putin sees Russia in an existential struggle with the West, in which the war on Ukraine is just one battle. If Russia had the means to fight it, the Russian army would still be marching on Kyiv. There is little doubt that once Russia reconstitutes its military, it will do exactly that.
If the human and economic losses of Russia's war on Ukraine accumulate over time, this could lead to anti-Western sentiment becoming more deeply entrenched. In the view of Russians who believe the state’s propaganda, it is the West that keeps the war going. To them, the country is merely defending itself and protecting other Russians.
This is why the West cannot lull itself to sleep and count on Russia’s weakness or instability. Instead, it must urgently redouble its current efforts and develop a long-term strategy for containing Russia.
Sanctions are crucial for slowing down Moscow‘s military resurgence. But they need further tightening. Non-Western countries should be urged to refrain from helping Russia with the right mix of pressure and incentives. But the West, and Europe in particular, also needs to invest much more in its own military capabilities to defend itself and increase support for Ukraine for many years to come.
Janis Kluge is a Senior Associate at the German Institute for International and Security Affairs (SWP) in BerlinThis article was originally published by The Moscow Times