The Big Bad Wolf (Mr. Putin) and Little Red Riding Hood (the Russian economy), courtesy of GDJ at Pixabay, public domain.
Carnegie Endowment for International Peace shows how dangerously fragile the Russian Republic economy now is:
Russia’s economic future beyond 2025 looks troubling. On the surface, economic growth and low unemployment create an illusion of stability for the country’s new economic model. However, this model is already confronting three fundamental limitations: a shortage of labor, exhausted production capacities, and stagnating export revenues due to sanctions. The storm of government spending is sustaining the current state of affairs, but it cannot address the chronic problems that have long plagued the Russian economy. The sanctions regime—partially mitigated by China, India, and other Asian countries—only serves to reinforce these old ailments. The transactional costs associated with sanctions weigh heavily on the entire economy.
Each passing month intensifies the pressure. The Kremlin is approaching a tipping point when the social contract between the state and the people will inevitably shift. Russians are increasingly being asked to accept rising inequality and a decline in quality of life in exchange for short-term stability and symbolic pride in the idea of a “fortress nation.” But even this compromise is becoming less and less sustainable.
A sudden collapse akin to the 1990s is unlikely: the government still has the resources to maintain a minimum level of order and control. However, we are already witnessing a largely irreversible turn toward economic stagnation. Continued reliance on the military sector and a mobilization-driven model will trap Russia in a “stagnation trap” characterized by low growth and chronic internal imbalances.
Glory to Ukraine!
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