The real WEAKNESS of Russia - worth reading if interested in Ukraine situation

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 commodities too. .

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 speculative attack.

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 represented.



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.
we can

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.

On the whole does a state which is wholly reliant on commodity/hydrocarbon exports for revenue & technical imports for their extraction sound like a strong country? Does a state with a declining & ageing population with an inedible degree of wealth concentration amongst a tiny elite sound strong? Does a state which has to subsidize a large number of its regions to keep them content sound strong? Does a state which stirs up nationalism and patriotism against an external agitator calling them "fascists" sound like a strong country?

To all of the above the awnser is NO.

Russia is weak and wishes to seem strong as it once was, however it is all bluster.

I wanted people here to see through the veil and glimpse the real Russia, as is often the case, it is too good to be true!

I would have to agree

Russia is walking a dangerous road, it would not be so hard for the west to plunge Russia into deep economic woes for its actions in Ukraine, they're already up # creak 3 months in, it's going to get a lot worst... A lot worst

I think the point of no return has been reached and we're likely to see a slow weening off Russian oil & gas from the EU, the future looks grim for Russia, and they're only likely to secure no more than 25% of the deal in which Russia had with the EU with china and then less and less as the west invests elsewhere in the world, Russia trading with china in the mighty Russian rubbles will backfire spectacularly... It amazes me how anyone can think it'll be a threat when the west is responsible for China's exports demand and debt based economy while propping up Russia's resource based economy

Yeah ok.. And pigs fly too

a reply to: rusblued9217

Nice job on the post. I feel like I have some perspective on the Russian economic situation. It explains why the west imposes sanctions as they do.

A proxy war seems unwinnable for Russia, but they have maneuvered deftly so far. They've annexed territory without much investment. I think that game is up though. In my view they are likely to celebrate their victory and stop. Settling for the role of "irritating neighbor" to NATO.

a reply to: InverseLookingGlass

So far but we are only seeing the beginning.

Just wait til Russia cannot import gas/oil extraction equipment, uh oh.
More and more capital flows out of Russia everyday too, people are getting very worried about the long term implications for Russia of this,

Putin has played his hand well so far, but it is mostly bluster, however the west is a truly FORMIDDABLE opponent.

Russia has seized economically worthless territory, Crimea is poor and very reliant on agriculture, I bet they can't wait for the corruption they will receive at the hands of Russia. Also the strategic importance is relatively unimportant too, Turkey which is a big NATO member can simply close the Bosporus to Russian passage, hence the Black sea fleet is trapped in the black sea, great..

Putin has embezzled vast sums aswell for his own personal gain. His approval numbers may be good at the moment, but just wait til the economic stagnation and possible decline begins. Those subsidies to poor regions will stop, and then discontentment will just build and build.

The west is in this for the long game now, I think Putin assumed they wouldn't be, maybe the first of a number of costly misjudgments.

Holy #, so I'd be a part of the 1%ers in Russia, lol. Poor a** country.

a reply to: 7918465230

Damn right, hardly the type of state that is "strong" right?

Putin is a fake, he wants to be a Stalin, but he wants the lifestyle of a billionaire.

A corrupt and amoral man.

originally posted by: 7918465230
Holy #, so I'd be a part of the 1%ers in Russia, lol. Poor a** country.

Russia is the 2nd most country in the world for inequality, 2nd only to China...

You wouldn't make Russia's 1% unless you have some 50 billion stashed away from dodgy mafia deals

a reply to: TritonTaranis

Yeah damn right

Here's a link to the article I sourced the data for Russian wealth inequality from.

Russian Inequality

Apparently just 110 Billionaires own 35% of Russia's wealth, that is truly astonishing.

That is literally less than 1/1,000,000 of the population, or 0.000001%.

So in Russia, the 0.000001% control everything, never mind the 1%.

originally posted by: TritonTaranis

originally posted by: 7918465230
Holy #, so I'd be a part of the 1%ers in Russia, lol. Poor a** country.

Russia is the 2nd most country in the world for inequality, 2nd only to China...

You wouldn't make Russia's 1% unless you have some 50 billion stashed away from dodgy mafia deals

Apparently, according to whatever the OP posted, you only need over 100 grand to be in the top 1%,....soooooooo, yeah, I'd be in the top 1%. Not top 0.00001%, but that's not what I said.

I'm certainly working on that though.

a reply to: rusblued9217

Excellent Thread!
Clear Logic and Intelligence.
I thoroughly enjoyed reading this well
organized contribution to ATS.
Great work! Thanks for Sharing.
S&F

a reply to: Wildmanimal

Thank you friend, I appreciate the appreciation.

I have been observing ATS for around 9 months now, I decided I wanted to understand the common trends amongst logical, informative posts which introduce new information to the community before I began posting myself, so as not to become a contributor who adds nothing.

I have a large range of topics (Mostly geopolitics, economics, finance & climate science) I have in-depth knowledge on, and I look forward to sharing my knowledge with the community in the near future, hopefully enlightening people to FACTS rather than conjecture.

Regards, Rusblued

a reply to: rusblued9217

This is the type of well thought out and presented post that brought me to ATS way back when. Kudos to you. Let's hope it can stay on track.

Now, to the topic of the post itself. It certainly doesn't look too rosy for Russia. My concern is what happens when you corner/trap an animal? They lash out in an attempt at self preservation. If Putin really gets pushed into a corner, the ramifications could indeed be far reaching and have more of a global impact than people would like to admit to.

a reply to: surfinguru

This is very true, however Russia would be hit with even heavier sanctions should they invade Ukraine.
Also should a war break out, lets imagine a possible future scenario:

War is ongoing in Ukraine, it becomes drawn out like Syria, China stays neutral and trades with both sides, over time Russia's moral standing plummets.
Now the Chinese state has a Casus Belli for action against Russia on humanitarian grounds, China begins to eye up the massively underpopulated, resource rich eastern Siberian lands of Russia.
Right next door to this the Chinese state has millions of people whom crave land, and especially pristine water and resource rich land. It doesn't take much in this imaginary but possible situation for china to declare war in order to annex the eastern Russian lands, it also has a historical claim as these lands were once Chinese, but seized and colonized by the Russian Imperial Empire.

Now take that into account because the strategic planners in Moscow will be thinking of all eventualities.
Would Russia want to open itself up to the potentiality of a possible Chinese re-annexation of territory which Russia itself annexed 200 years ago?

Russian historical annexation of Chinese territory, Treaty of Nerchinsk

Birth certificate or it didn't happen. I can claim to be a Russian to add propaganda too. $1000.00 to be in the top 1% hmmm.Stacking the arguement. Millionaires in the West still letting Children starve and homeless people living under bridges. Yes/No?

Also see you only joined since November, since the trouble started.Also questionable.

a reply to: 13th Zodiac

What are you claiming.
Are you claiming that I am a fake person?

Why is $100,000 not an acceptable amount to be in the top 1%? as I stated earlier the state is highly unequal.

Is the eloquence of my argument a threat to your thought paradigm, or maybe you dislike the data I provided?

The western crony capitalist system is indeed morally bankrupt, however can we talk about that in another thread, I don't want to pollute this one.

I am not picking and choosing what facts I present. I am simply presenting the true data. The Russian state is weak and built on export commodities, I have higher level qualifications in Economics hence why I know a lot about economic systems.

a reply to: rusblued9217
You augment Russia's appearance of weakness by omitting info on weapons exports and military strength. Is she really that weak?

Ive never thought much more of Russia other than a military juggernaut with a lot of natural resources..

originally posted by: 7918465230
Holy #, so I'd be a part of the 1%ers in Russia, lol. Poor a** country.

Well think of it this way... If you hold $30,000 in wealth, you are a 1%er in terms of world population. I read that somewhere. Apparently most of the 7 billion people in the world is dirt poor by Western standards. I don't know what it takes to be a one percenter compared to just the US or UK, or AU. I carry about MAYBE $500-$1000 (retail value, resale value would be less than $500) in wealth in assets like clothing and little knick knacks, books, etc. My books are probably the bulk of my earthly wealth.

Eta- Sorry I also wanted to add a debt of gratitude to the op for providing this eye opening information. Now I feel much more confident living in a western nation! Thanks for that! But I really just wish everyone would get along...

a reply to: rusblued9217

Thank you for explaining this situation. A star for you! You really did a great job on this and I loved the maps. I don't know if you made those or got them from somewhere else, but they were very informative. I had a feeling that Putin was possibly stirring up things because of the economy there after reading a posting a few days ago by one of our brothers on this site. It looks like getting the people to rally around the flag takes their minds off the real problems facing their economy. I don't care for Putin, and I'm sorry to see so many Russians giving their approval to his actions. After ten years in the military watching those guys, I was just starting to like them. Now I am not trusting anything that comes out of Russia once again.

Thanks Vlad

originally posted by: 3n19m470

originally posted by: 7918465230
Holy #, so I'd be a part of the 1%ers in Russia, lol. Poor a** country.

Well think of it this way... If you hold $30,000 in wealth, you are a 1%er in terms of world population.

Jesus. I lost over half that in a day in the stock market once, lol. So I lost half of what it takes to be a 1%er in the world, in a day? Wow. I guess I should appreciate what I have a little more.

Sh!t, I have more than 30 grand just in guns alone, lol. People are poor as hell, and people think the US is doing bad? LOL. Give me a break.