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Managing Russia's Economic Decline

Published: March 17, 2014 (Issue # 1801)


One reason why Russians support their country's invasion of Crimea is because Russia looks strong again. The Russian military appears well-equipped, disciplined and efficient. Gone are the undersized Soviet-era recruits, the cartoon Rambos of the Chechen campaigns and the officers in banana republic-style oversize hats of the 1990s. These guys look like real soldiers — like U.S. GIs.

This picture of strength obscures the fact that the Ukrainian misadventure stems not from strength but from weakness. The need to use force comes from Russia's failure to interest Ukraine in a voluntary alliance. Russia's economic and political system is so utterly unattractive that Ukraine, like former Soviet satellites in Eastern Europe and other former Soviet republics, wants to have nothing to do with it. This is the reason so much of Ukraine has opted to join the West.

Related: Recession Fears as Economic Growth Slows Again

For 20 years, Ukraine had a system that was very similar to Russia's — until its latest kleptocrat, the utterly shameless and supremely greedy former President Viktor Yanukovych, finally ran it into the ground. The choice to adopt a more open, competitive, rules-based Western-style system is natural for a democratic Ukraine. Putinism can only work in a country that, like Russia, earns $350 billion annually by exporting its oil and gas.

But even Russia's phenomenal natural wealth can't support indefinitely an economic system that produces little and instead efficiently breeds parasites. Even with high oil prices and output, the Russian economy is sputtering. Capital and brains are fleeing the country, investment is shrinking, and inflation is on the rise. The Central Bank has already been forced to devalue the currency to make petrodollars go farther in ruble terms.

Related: Ruble Being Punished for Economy, Not Ukraine

It is the beginning of the end for the Russian economic boom. The natural gas market is shrinking, and prices are under pressure thanks to new fracking and gas liquification technologies. While Russia goes on pumping oil, the rest of the world is developing renewable sources of energy and energy-saving technologies. Oil from shale has boosted U.S. oil output to its highest level in 25 years, whereas Brazil is planning to triple its deep-sea oil production in the next 15 years, to cite just two examples.

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ALL ABOUT TOWN

Sunday, Dec. 21


The Zenit St. Petersburg basketball team returns to the northern capital this evening for a matchup with Krasny Oktyabr, a Volgograd-based basketball club. Tickets for the game, which tips off at 6 p.m. this evening, can be purchased on the club’s website or at their arena, Sibur Arena, on Krestovsky island.


Satisfy your sugar cravings during Sweet New Year, an ongoing seasonal festival at the Raduga shopping center. Each weekend of December will welcome hungry visitors to taste hundreds of different kinds of desserts. Workshops are open to visitors and seasonal gifts can also be purchased for those rushing to finish their New Year shopping.



Monday, Dec. 22


Pick out the latest fashions as holiday gifts for loved ones or as early presents for yourself during the Christmas Design Sale at Kraft on Obvodny Kanal, starting on Dec. 20 and continuing through Dec. 27. Designer clothes will be on sale every day of the week or you can buy something more festive to decorate the home while sipping on hot coffee and perusing the various master classes.



Tuesday, Dec. 23


Meet Arctic explorers Fedor Konukhov and Viktor Simonov during SPIBA’s and Capital Legal Service’s event “Arctic Expedition” this morning in the Mertens House business center at 21 Nevsky Prospekt. The meeting will discuss the explorers’ ongoing eco-social project and how companies can use the project as a unique marketing opportunity. Email office@spiba.ru by Dec. 22 if you wish to attend.



Wednesday, Dec. 24


The Anglican Church of St. Petersburg we will be holding a Christmas Eve service at 7 p.m. led by Rev Wm. Shepley Curtis of the Episcopal Church. The service will be held at the Swedish Church at 1/3 Malaya Konyushennaya Ulitsa.



To have your event included in All About Town, email tot@sptimes.ru



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