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Publication
February 6, 2018

Russia’s Economic Prospects – Modernisation or Stagnation?

by
Henry Jackson Society

A new policy paper published today by The Henry Jackson Society warns that Russia’s reduced economic prospects could lead the Kremlin to adopt a more aggressive foreign policy in the years ahead.

Russia’s Economic Prospects – Modernisation or Stagnation?, authored by Central and Eastern Europe specialist and former Foreign Office Special Adviser David Clark, finds that:

  • Without major reforms, Russian economic growth is likely to remain stuck at a level significantly below that of the early years of Vladimir Putin’s first presidency, with both GDP and living standards essentially flat since the 2008 financial crisis.
  • The economic reforms necessary would pose a considerable threat to the authoritarian brand of government that has defined Putin’s time in office.
  • With reform unlikely, the prolonged squeeze on living standards that will result threatens to lead to a more aggressive foreign policy as the Kremlin seeks to deflect attention by stoking nationalist sentiment.

However, the report argues that, far from revelling in Russia’s difficulties, the West should maintain efforts to help Russia achieve a long-term transition to a modern and rules-based form of capitalism.

Summarising his findings, David Clark said:

“Next month’s stage-managed presidential election will confirm Vladimir Putin’s hold on power, but it will do nothing to resolve growing doubts about  Russia’s economic direction.

After a decade of stagnation, Putin has no clear plan to restore growth and boost living standards other than hoping for the oil price to rise. There is certainly no indication that he is willing to undertake the kind of structural reforms needed to diversify the economy, strengthen property rights, improve the business environment and encourage the growth of small and medium-sized enterprises. 

Short of this, the system Putin created is likely to come under increasing strain in the years ahead.”