Trouble in Russia
''nervous' seems to sum up the West's outlook for the future of the Kremlin.'
Ben Wood | 6 March 2016

It is no big secret that Russia enjoys trouble. Whether it is causing unnecessary friction with the West, or stirring up trouble in Eastern Europe, some of the biggest and most controversial news stories have a habit of orientating themselves towards the Russian bear.

 

In 2015, however, the Kremlin saw some of its worst economic outlook in years. Russia’s economy contracted by a gloomy 3.7% in 2015, according to preliminary figures published by the country's statistics service. Retail sales also saw a downturn and plunged 10% and, to make things worse, capital investment fell by 8.4%. This was the worst economic performance since 2009 and ‘The Great Recession.’

 

So the question that lingers is: why? There has been steady economic growth in most of the highly developed western countries, and Asian economies are still enjoying widespread, albeit slowing, growth. So why is the Kremlin at the heart of what some are calling a full-blown recession? The answer is complex. However, the two main factors are: an enormous crash in the oil price (which has fallen by 70% in the past 15 months) caused by excess global supply, and some tough economic sanctions imposed by the West, after Russia annexed Ukraine’s Crimea region in 2014. Both of these unforeseen events have put one man, especially, in the firing line of the Russian public: Mr Putin.

 

Of course, as if history could repeat itself any better, Russia has immediately put the blame on the West. Vladimir Putin accused the US and the EU of trying to weaken the Russian economy at a recent conference. There is also talk in the Kremlin of a supposed American-Saudi conspiracy against Russia, and even ‘Nato Economic Warfare.’ It is no lie that Russia’s rouble has seen a sharp decline in value against the US dollar in the last couple of months, but many experts argue that the rouble crisis was avoidable and, by anyone’s standards, the annexing of the Crimea region was unnecessary.

 

So that leaves the oil price. It is most evident now, after the plunge in price, how dependent the Russian economy still is on oil, and the lack of diversity and depth within their economy. Yet Mr Putin shovels further blame onto the West, by saying that a large part of the increase in the supply of oil was deliberate fracking by the US, and Canada’s aggressive increase in production of its tar and shale sand fields.

 

With its economy contracting, and bleak forecasts for the future, most would hope that the Kremlin is cutting costs and taking responsible economic decisions for the future, which, for the most part, it seems it is. Russia is making huge cuts to state benefits and state services in order to help tighten its grip on the situation, however, under the leadership of Mr Putin, Russia’s military is forecasted to expand in 2016.  The President has said that Russia will put more than 40 new intercontinental ballistic missiles into service this year, on top of maintaining its Military stockpile of approximately 4,500 nuclear warheads. With actions like these, it is difficult to see what type of strategy Mr Putin is trying to follow, but with recent events, like the downing of a Russian jet by Turkey, and Russia’s further involvement in the Crimea region, ‘nervous’ seems to sum up the West’s outlook for the future of the Kremlin.

 

Image issued under the Creative Commons license

James Routledge 2016