WHAT RUSSIA RISKS IN CASE OF FURTHER ESCALATION OF CONFRONTATION WITH THE WEST
Alienation towards Russia is growing in the world. We are "falling" into international isolation more and more actively. We have to say that this course has been chosen by authorities of the country deliberately and is considered "optimal" by them still. However, it may have catastrophic consequences not for those who make such decisions but for Russian economy.
Political elite of the country perceives the Russian Federation as awakened super power and attribute anti-Russian attitude to the fact that "status of dominating power actually automatically generates a wish of other states to acquire bigger rules during making of their decisions and to belittle positions of the strongest one" (Henry Kissinger). But even if the matter is about this and not about reaction to breaches of the international law norms we need to bear in mind that contemporary Russia is not a super power.
A country that accounts for 2.8% of the global GDP, that has only 2% of the population of the world, that cannot populate and develop more than 60% of its territory, that provides its export by more than 75% with oil, gas, ore and coal and, what is the most significant that does not produce at home or even abroad but by forces of its companies any hi-tech products (except for weapons) cannot be a super power. Yes, Russia has the fifth place in the world according to the volume of currency reserves and the second place according to export of armament but this does not give it additional opportunities. It is possible to freeze the reserves like in case of Iran and weapons are used only seldom, thanks the Lord, Buk is not used in such a mass way as mobile telephone, portable computer or tomographic scanner and Russia has not learnt to produce anything from this list.
At present, Russia depends on the external world critically and such dependence is not compatible with "super power status."
On the one hand, the budget is filled by 51% with revenues related to production and export of energy resources. Giving up of a half of the purchased gas by the EU countries can make Gazprom unprofitable and deprive the budget of 10% of its revenues. Embargo on supply of modern oil and gas producing equipment (imported models account for up to 70% of all its new purchases) will ruin the plans of gas supply to China and will end the dreams about seabed and will cause decline in production volumes that already cannot exceed the late Soviet results. Along with this, Russia cannot hope for domestic demand because the industry is destroyed no matter what it has been like before: in 1982 the country consumed 84% of produced oil, now it consumes slightly more than 30%. Powerful sanctions against the resource sector are a death sentence to the Russian economy: they can lead it to a halt in two or three years and China will not have time "to help."
Along with this, import of goods from abroad exceeds 15% of the nominal GDP of Russia now, whereas in the Soviet time it hardly reached 2% and was provided by satellite countries in many aspects. Stopping of supply (and prohibition to other countries to do this) may block development of our defense industry (that uses up to 30% of imported components), space and aviation industries (up to 65-70%) and pharmaceutical industry (almost 80%). I do not even say that Russia fully depends on the external world in supply of office and consumer electronics and components for it, extremely depends on supply of medical equipment, very noticeably depends in supply of consumer goods and food, construction equipment and materials and food industry. No matter how had the country tried to change its political attitude to the West in the last 15 years its economy was never built according to the mobilization model since 1992.
In any case, "material" dependence expressed in export and import (that authorities naively promise to surmount by "import substitution") is not the main thing. Financial dependence is much more important. This is dependence not only on Western payment systems and mean Americans who can block our reserves.
In the last 15 years, Russia developed as a country oriented at consumption. The share of investments in GDP decreased from Soviet 34-38% to 17-20% and such "eating up of the reserves" became an even more important component of the economy than high oil prices. To maintain investments companies borrowed money abroad. As of July 1 of 2014, the aggregate debt exceeds $650.2 billion against the background of reserves of the Central Bank worth $478.3 billon and reserve fund and national well being fund worth only $175.2 billion. The need to pay these debts will lead to reduction of investment demand and growth of capital outflow that in turn will force portfolio investors to sell out assets. Our well-being (authorities of the country did not understand this) has been based and is based on integration into the global world of which they are so afraid and which they hate so much. Conflict with this world is dangerous by serious consequences for Russia.
The West also has another kind of weapon, the most powerful one, in the form of Russians themselves. Defensive consciousness and readiness to live in a closed country were formed in the Soviet Union in several generations due to cruel repressions. There are no such factors of stability now. More than 25 millions of Russians were abroad. About 5 million people have residence permits or long-term visas. It is impossible to close the country but according to the logic of ongoing events exactly this will have to become a response of the authorities to mass outflow of capital and people after this. The "super power" only sooths itself down with illusion of loyalty of citizen. Such loyalty has been based on well-being and growing incomes but the new "public agreement" so far implies exchange of loyalty and patriotism for "feeling of grandeur" of the country and not success of a certain person. The authorities "atomized" and individualized" the society so radically not to let people get united that it would be unable to create a real unity now and would be able to create only its phantom. If the country starts closing itself in conditions of economic recession and politically inadequate decisions, no matter inside or outside, it will be blown up like a tin can put on fire.
In reality, Russia keeps afloat still only because leaders of the West are not ready to stake their all yet and to achieve radical changing of the Russian foreign policy. Along with this, every day a wish not to allow unleashing of a new "cold war" hinders uniting of the West against us less and less. In turn, our authorities do extremely little to prevent or at least to minimize consequences of the storm approaching to Russia. Unlike the Soviet Union that has been a self-sufficient super power in reality present-day Russia is unable to counteract to the West for a long time.
So far, only one thing saves Russia. This is inability of the West to believe to the end that a county that has always been considered European acts contrary to the world order established in the world and that not a power that is ascending to the first position in the international ranking but a country that has just quit the second ten throws a gauntlet to it. The following mantra dominates in global capitals now: we should not allow a new "cold war." But it will dominate only as long as, on the one hand, Russia does not go outside of the framework of the commonly accepted thing and, on the other hand, politicians in Washington, London and Berlin do not recall that they have won a "cold war" in the past against a real super power and its powerful bloc of allies, why cannot they win another one, moreover so that the rival is weak but self-assertive?
Russia of 2014 is not a new "buttress of stability" but a vulnerable super power that needs preserving of the status quo established in the world at the beginning of the 21st century that ensued ideal conditions for the current prosperity for our country the biggest of all. We are striving for this now but we have not understood what for we need this and in which costs this may result in the near future.
Source: Moskovsky Komsomolets, July 23, 2014, p. 3
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