I am new to posting on ATS, only started posting properly over the past two days.
So please give me some leeway if I post this in the wrong forum or whatever.
As an ethnic Russian born to western born parents and born and raised myself in greatest city in the west, (London) I take a large interest in the
current events in Ukraine and Russia.
From reading opinions on this site I believe there are many misconceptions people may have about the apparent strength of Putin and Russia.
I wanted to take some time to post a thread in which I can enlighten many to the true weakness of the Russian state.
Firstly Russia has many structural problems with its economy and social fabric.
Russia is a country which is blessed with vast natural resources and this can be seen by some as a blessing, however the reality is it is just as
affected by the resource curse as other well endowed (resource wise, not penis) nations.
The Russian economy is incredibly over-reliant on hydrocarbon export revenues, this export treemap (a map of imports/exports where the area denotes
the relative size of each export within the export/import composition) shows how reliant Russia is not just on hydrocarbon exports, but basic
As the map shows, Russia exports almost entirely basic goods and commodities, hence it has a very small manufacturing base. This is the resource curse
in action, Russia is incentivised to spend capital developing its resource extraction rather than its manufacturing base, this means that the state
ends up importing almost all technical goods required to extract mineral resources, hence it is very susceptible to sectoral sanctions (As the US &
Europe are considering at the moment) aimed at this sector.
This is the treemap of Russian Imports.
It shows Russia imports mainly manufactured goods.
The over reliance on hydrocarbon/commodity exports means the state also has a high degree of exposure to shifting price levels, should the price of
oil or gas plummet due to say US incentivised increased Saudi/Qatari production then the Russian state would not be able to meet its spending needs.
This is highly dangerous considering a number of Russian regions are supported via large centralized state subsidies, as a result the state would have
to burn through its foreign capital reserves, further weakening its supply-side position, the perceived weakness opening Russia up to an international
To demonstrate how the Russian exports look compared to an equally large mixed economy I have uploaded the UK's export treemap.
This shows how the British economy is far more diversified and thus far less exposed to an external shock, or shift in commodity price levels.
The next point I want to make is about the incredibly top end skewed wealth distribution is the Russian Federation, below it is graphically
This is the wealth distribution of Russia, you can see that 93% of the population have wealth of less than $10,000 whereas, 1% have wealth in excess
of $100,000. This demonstrates how the Russian Oligarchic socioeconomic system is very vulnerable to a sharp economic shock, i.e a fall in oil
production or a fall in oil price levels, which is what will happen if strong sectoral sanctions aimed at the hydrocarbon extraction sector happen.
Should this happen then Russia will struggle to fund the subsidies it pays to poorer regions of its federation, and it will struggle to invest capital
in further resource extraction without borrowing.
Below is the British income distribution for comparison.
We can see that it is still top end skewed (as all wealth distributions are), but it is far, far more evenly distributed than Russian wealth. This
should show you just how skewed wealth is in Russia.
Now lets look at capital flows in Russia since the credit crisis.
This demonstrates that Capital has been flowing out of Russia on a large scale since 2010 at least, Why?
Maybe it is because the Russian Elite, who we have seen already are the owners of almost all wealth in the state are nervous about the future of the
Russian economy. This combined with the laundering of embezzled state funds via the London markets & British tax havens are the main reasons for this
large domestic capital outflow in recent years.
Then finally there is the population growth of the Russian state, displayed below.
From this we can see that almost every single Russian region situated in Europe has a declining population, from a mixture of low birth rates combined
with large scale emigration. The regions with increasing populations are those in the Caucasus, the Islamic inhabitants of the Russian state & the
mineral rich Siberian regions (as a result of internal migration).
So from all of this data I have demonstrated that the Russian state is wholly reliant on export of basic goods such as minerals, crops & hydrocarbons
for its income. As a result of their resource wealth they spend little on developing domestic manufacturing, hence import most technology they require
to extract those very resources they need for export. Hence they are incredibly vulnerable to a sanction against export of technical goods aimed at
the hydrocarbon/mineral extraction sector. Also because of the massively unequal wealth distribution domestic consumption is not nearly what it could
be should wealth be more evenly distributed, having a result of the Russian state being wholly geared toward exports for revenue (they have a flat tax
rate of 13% on all income), hence a fall in oil prices cannot be compensated for unless a MASSIVE rise in domestic taxes occurs.
Take all of this information combined with the falling population and heavily subsidized peripheral regions of the federation, one can see the
inherent weakness of Russia.
The Ukraine crisis is highly dangerous for Russia, the very future of the states existence is at stake. Vladimir Putin is in my opinion acting out of
weakness, he wishes to be perceived as strong by the world community and his own people. If you notice there is constant reference to the
revolutionary government as Kyiv as "fascists", despite only a minority belonging to Pravda Sektor (the far right). Putin is trying to stir up
nationalism and patriotism amongst his people, this is something which usually only occurs in states which are worried about the future of their
systems, focus domestic attention on a foreign agitator and try to unite the country. I believe Putin is doing this, and he seems to have fooled many
of you here unfortunately!
This is why I am writing this post, I wanted to enlighten you to the many negative effects of Putins rule.
He may have enhanced the wealth of Russia, but the vast majority of this is due to soaring commodity and oil prices in international markets. He has
failed to invest in developing Russia as an independent manufacturing power, and as a result Russia remains highly exposed to international commodity
price shifts, he has not enabled domestic consumption to increase that much due to high wealth concentration amongst the elite, capital which has
largely flowed out of Russia into London.
edit on 10-5-2014 by rusblued9217 because: (no reason given)
edit on 10-5-2014 by rusblued9217 because: (no reason