April 12, 2017
By Jacob Sharpe
However, behind the Cold War-levels of military activity and violations of international laws are fundamental issues which will plague Russia going forward. Demographic struggles have stricken the state since World War II, commodity price fluctuations and sanctions have crippled economic output, and the current defense spending trends are unsustainable. Against the backdrop of harsh economic reality, the illusion of Russian resurgence can only be maintained for so long, and NATO policymakers should take note.
An increased NATO presence in the Baltics and more robust defense measures are all necessary and proportional steps towards creating a formidable deterrent to protect the United States’ more vulnerable allies in Russia’s neighborhood. Russia, however, is not the existential threat to Europe that the Soviet Union once was, and it shouldn’t be treated as such. Time is not on Russian President Vladimir Putin’s side, and he can only ignore fundamental flaws in the socioeconomic landscape of Russian society for so long. Building submarines and nuclear weapons will not reinvigorate the Russian economy, and could eventually degrade what progress has been made to reestablish Russian prominence on the world stage.
The inertial nature of demographic pressure makes it an exceedingly difficult problem to address, but also allows nations to forecast more easily. By nearly all calculations, Russia’s projected population growth appears stagnant at best. Since the collapse of the Soviet Union in 1991, the population of Russia (despite upwards of 9 million immigrants) declined each year until 2013.
The combination of a decreased standard of living, a decline in the number of women aged twenty to thirty, and an increased mortality rate have all damaged the prospects for growth in Russia. Rosstat, the Russian state statistical agency, estimated that the population will decline 20 percent in the next thirty-five years if current trends continue. This decline has been halted and even reversed to a minor extent in recent years, but reversing long-term trends will be difficult.
The economic outlook for Russia offers similarly bleak prospects, yet there are some signs of a slight turnaround. When compared to a negative 3 percent growth over the past two years, even the small 1.2 percent growth projected by the Russian finance minister (as well as the World Bank) is something to celebrate. Moscow has made some spending adjustments to reflect current oil prices, and Standard & Poor’s has upgraded its credit rating to stable.
The Russian people, however, are still in dire straits. In 2016, one-quarter of Russian companies cut salaries. Overall, the average Russian wage dropped 8 percent last year, and 9.5 percent the year before. International sanctions imposed on Russia continue to cause problems, and energy prices have not recovered to previous highs. Even as some Russian people celebrate the election of US President Donald J. Trump, who has expressed a desire for better relations with Russia and suggested that sanctions may be at least partially lifted, the potential for the removal of sanctions could lead to a speculative capital rush, creating more uncertainty in an already fractured economy.
Worsening the economic downturn is the Kremlin’s spending to modernize and expand its military capabilities amidst declining revenue and depleted reserves. In a recent defense industry meeting, Russian Prime Minister Dmitry Medvedev stated that “funding has already been set aside for the coming years and that amount won’t be changed.” That statement doesn’t appear to be entirely correct, as defense spending is set to decrease by 7 percent, but it is telling when other federal departments were dealt 10 percent reductions.
For the time being, it seems this plan has won Putin praise at home and power abroad, but in the long-term it could place him on unsteady ground. As early as 2015, Russia had begun tapping into its “rainy day fund” (generally regarded as an emergency measure to address economic slowdowns), and the minor economic recovery is not enough to make up for these shortfalls.
A continuation of this spending behavior combined with budgetary constraints could force Putin to make politically risky fiscal adjustments. He may have convinced his admirers that a bit of budgetary belt-tightening is necessary to ensure Russian security and stature, but economic backpedaling is only digestible for so long.
Even the Ukrainian conflict, once a source of popularity among the Russian people, has begun to hurt morale and highlights the economic malaise at home.
However, Vladimir Putin is not a man to be underestimated, and Russia will remain a threat. It still possesses one of the most powerful militaries in the world, a massive stockpile of nuclear weapons, and a reinvigorated willingness to use its political muscle to influence the international system.
Yet while a cursory examination of approval ratings may show an unassailably popular leader, Putin’s power structure is more fragile than it first appears. Financial strain will continue to pressure state-dependent segments of the Russian populace, which have historically been the bedrock of Putin’s support.
It seems Putin’s Russia won’t perish in a Manichean clash in the Fulda Gap, but like the Soviet Union before it, today’s Russia will crumble under the weight of its own mismanagement and economic failure. Perhaps history does repeat itself.
Jacob Sharpe is an Intern with the Transatlantic Security Initiative in the Brent Scowcroft Center on International Security at the Atlantic Council. You can follow him on Twitter @Jacobwsharpe.