Like many others, I’ve been anxious for months about what would transpire in Ukraine. Even if it succeeds in entirely fending off Russia and regaining and securing its borders, the nation has been destroyed, thousands of people have been killed, and many more have been traumatized and terrified. It will not be simple to reconstruct the country. But I’ve also had a lot of questions about Russia. Additionally, a lot of this pondering concerns energy and its economy.
First of all, it’s important to note that, in addition to the numerous Russians who have invaded Ukraine and perished in the process, the population of the nation is declining due to a significant migration of individuals who do not want to be drafted and who oppose the invasion. People who are frequently more educated, competent, and open-minded than your average Ivan have had enough and are leaving Russia with a bleaker future in order to start over somewhere else. According to the Federal Security Services’ own estimations, almost 3.8 million Russians departed from January through March of this year, according to Fortune . The Economist had a headline in August that read, “Much of Russia’s intellectual elite has fled the nation,” prior to the recent “mobilization” and flight. According to a Forbes Russia article published on October 4, up to 700,000 people may have departed the country since Putin authorized the draft.
Russia has a long history in the arts, sport, science, and technology. A few of my favorite tennis players, including the former world number one, are Russian. That cannot be disputed. However, prior to this massive departure, the nation already struggled with economic diversification. And that issue has to do with energy, specifically filthy energy. In 2019, up to 60% of Russia’s exports and up to 40% of its federal budget revenues came from the oil and gas sector, according to Wikipedia . Oil and gas profits, which are a major factor in Russia’s economy and development, won’t last forever. It’s difficult to imagine how the US and Europe would decide to turn the spigot back on right now, even when this war is ended. After all of this, why further engender dependence on the country or support its economic growth? Since there is a large worldwide market and certain countries, like China and India, have been content obtaining a better bargain on Russian oil, Russia has so far been able to find a market and consumers for its oil and gas. But the market will contract. 13% of newly sold automobiles in Europe are totally electric, while 21% have a plug. In China, 30% of new automobiles have a plug and 22% are entirely electric. Growing EV sales will take some time to significantly reduce oil demand, but it will happen. Oil-dependent economies will begin to feel the pinch in very tangible ways as markets become more constrained and there is a general decline in demand for oil.
That all leaves out the issue of what will happen with Vladimir Putin for the time being. Dissension is increasing and at times even coming from ardent Putin loyalists, indicating that it is no longer being completely suppressed. There is less chance for widespread unrest now that so many individuals opposed to Putin’s militaristic actions have fled the country, but nearly no one is pleased with how things have been going since since Russia invaded Ukraine. People are losing their sons and wives, “patriots” who thought Ukraine would quickly join Russia are disappointed, the economy is in shambles, those in the military’s highest echelons are humiliated, and oligarchs and other businesspeople are displeased. Many people wonder if Putin’s days are shorter than we usually think. Who will rule in his place if his reign ends and he is overthrown? Whoever takes over Russia, will they try to rehire the smart people and move away from fossil fuels? Or will they become even more ingrained in the realm of fossil fuels? How challenging would it be to revive the Russian economy if revenues from fossil fuels finally decline?
It’s difficult to imagine much changing if Putin does continue to hold power. Even if Russian energy revenues decrease, the oligarchs will continue to be wealthy while the bulk of the poor will still struggle to make ends meet on a month-to-month basis, ensuring that the social order remains wildly skewed economically. Russia, according to John McCain, is “a petrol station posing as a country.” It would still be a gas station, although a smaller or less profitable one. The nation won’t be transformed from a convenience store to a Starbucks.
In the coming years, I believe Putin’s resignation is more likely than not (although it is obviously very difficult to predict). I just find it difficult to understand why people would want a more transparent and democratic form of government given that so many people have departed. Instead of trying to restructure things and forego the short-term economic benefits of being at the top of the food chain, it seems more likely that a power- and money-hungry person will look at the oil and gas industry’s pot of gold and make sure to keep it flowing and reap the benefits. The likelihood that the deeply compromised state will continue to be deeply corrupted and that some powerful individuals will profit greatly even as budgets are depleted and the poor continue to suffer from poverty is high. Citing Wikipedia
“Russia was ranked 129th out of 180 countries in the 2020 Transparency International ‘s Corruption Perceptions Index ratings, making it the lowest-rated European nation. In Russia, corruption is seen as a serious issue that affects many facets of daily life, including the economy, business, and Fortune 0 Fortune 1, Fortune 2 Fortune 3 Fortune 4, Fortune 5 Fortune 6, Fortune 7, and Fortune 8. The historical style of public government in Russia has a strong foundation for the Fortune 9 phenomenon of corruption, which is linked to the country’s overall The Economist 0 weakness. The Economist 1 As of 2020, the proportion of business owners who distrust law enforcement agencies increased to 70% (from 45% in 2017); 75% do not believe that courts are impartial; and 79% do not believe that the legal system shields them from abuses of the law, such as racketeering or arrests made on shaky grounds. The Economist 2 “
It’s difficult to imagine that changing, Putin or no Putin. Just as it’s difficult to imagine whoever is in charge investing in an energy and economic change while neglecting the short-term advantages of black gold. Who in Russia is going to spearhead a drive into the same and a cleaning up of its oil and gas business while neighbors in Ukraine continue their quick-moving push into solar power, battery storage, electric vehicles, and Starlink-based communications? Who in Russia will transform the venerable powerhouse into a more advanced, diverse, and robust economy?
Picture in focus:
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