The coronavirus pandemic will undoubtedly cause a global recession. That, however, does not mean all countries will be hit equally. Nations that manage to preserve at least some form of sovereignty might be able recover in the foreseeable future. Is Russia one of them?
The Russian economy heavily depends on oil and gas exports, although not nearly as much as Saudi Arabia and other oil-rich Gulf states. The Russia-Saudi oil war has complicated the prospect of Russia’s economic growth. But even without the oil dispute, at this point any economic growth looks almost impossible. Due to the coronavirus, most economic activities around the world were put on hold. Production has been drastically reduced even in China, which has often been described as the world’s factory. As the global demand for oil went down, and Saudi Arabia deliberately increased production, it is natural that the crude price was decreased. Even though the oil war will result in both Russia and Saudi budget revenues going down, some experts suggest that, at the end, Moscow will be the winner. However, that could be just a Pyrrhic victory. Due to the oil war, the Russian ruble went down and the general population is already preoccupied with economic problems as prices were increased.
In spite of sanctions that were imposed by the West in 2014, the Russian economy is not isolated. Russia is still part of the global financial and economic system. As such, it will also feel the consequences of the global recession that will, according to the International Monetary Fund, be at least as bad as during the global financial crisis or worse. That, however, does not mean that the Russian economy will collapse. Even though the Russian industrial base has been devastated following the breakup of the Soviet Union, the country is still relatively self-sufficient, especially in terms of food. Reportedly, Russia is the world’s top wheat exporter, while its other agricultural sales are primarily sunflower oil and fish.
When it comes to politics, there is speculation that Russia is trying to benefit from the coronavirus pandemic. The Kremlin recently sent nine military planes loaded with medical equipment and specialists to Italy, as the Mediterranean country battles the worst coronavirus outbreak in Europe. Some analysts argue that Russia helped Italy in exchange for Rome’s support for the future lifting of EU sanctions against Moscow. Since there is no such thing as a free lunch, such an option should not be rejected, but even if that was the plan, there is absolutely no guarantee that sanctions will be lifted once the pandemic is over. Italian influence in the European Union is rather limited, but there is no doubt that the Kremlin will try to portray its actions in Italy as another geopolitical victory.
In the meantime, Russians will have to cope with their own problems caused by COVID-19. At this point, Russia has fewer recorded cases of coronavirus than other major European countries. However, there are claims from some experts that Russian authorities may be under-reporting the number of cases. Although unfounded, such claims are not far from reality. If history is any guide, Soviet officials did not properly react after the Chernobyl disaster in 1986 and they tried to undermine the consequences of this tragic event.
Even some Russian officials suggest that the number of people infected with the coronavirus may be higher than what officials reports say.
“The fact is that the testing volume is very low and the real picture – no one in the world knows” said Moscow Mayor Sergey Sobyanin.
On the other hand, the testing volume is very low not just in Russia but globally. It is worth noting, however, that Russia took serious measures to prevent the spread of the coronavirus months ago. The Russian Federation shut down its border with China in late January and set up the isolated quarantine zones, which many public health experts believe genuinely mitigated the spread of the virus. The Kremlin recently delayed a referendum on a series of constitutional amendments, including one that would allow Vladimir Putin to remain in power through 2036. Some Russian officials also suggest that the May 9 parade to commemorate the Soviet Union’s World War Two victory over Nazi Germany might also be postponed.
Finally, it remains to be seen what measures Moscow will take to ease economic fallout. Since powerful Russian oligarchs still have a very strong influence in the Kremlin, it is very likely that they will try to make a profit out of the coronavirus crisis.
Image credit: Darko Stojanovic