Russia's Economy under Sanctions: Early Impact and Long-Term Outlook

Four months after a coalition of Western states imposed unprecedented sanctions on Russia, the Russian economy seems to be holding up better than expected. The Central Bank has managed to stabilize the country's financial system and Russian officials are trying to project optimism about the future. However, this optimism is likely to be short-lived. The sanctions' effects are only just beginning to unfold: supply-chain problems are intensifying and demand is falling quickly. In the longer run, Russia's economy will become more primitive as it partially decouples from international trade. To avoid social tensions, the government will intervene to support Russian businesses, leading to more protectionism and a larger state footprint in the economy

Brief respite for Lukashenka: Russian loans alleviate Minsk's immediate financial woes, but deepen dependency

Late on 3 April 2017 in Saint Petersburg, Vladimir Putin and Alyaksandr Lukashenka announced the end of the Belarusian-Russian energy dispute. New loans from Moscow appear to be the central outcome for Minsk. This provides relief for Lukashenka, whose regime currently finds itself squeezed between economic difficulties and social protests. But the agreement leaves Minsk’s underlying economic problems unresolved, while the additional debt ties it even tighter to Moscow. In exchange for its support, the Kremlin could at some point demand Minsk make concessions that contradict the EU’s interests. To date, however, Lukashenka has sought to retain a degree of autonomy from Moscow, with Minsk’s dialogue with the EU providing an important counter-weight. (Autorenreferat

Kremlin launches risky pension reform: plan to raise retirement age undermines confidence in Russian leadership

On 14 June, Prime Minister Dmitry Medvedev announced proposals to gradually raise the retirement age in Russia from 2019. The Russian leadership wants to use this reform to tighten its budget and boost economic growth. Despite the media distraction caused by the Football World Cup, there is growing protest against the proposal. Trade unions, loyal opposition and Alexei Navalny are planning demonstrations. The Kremlin has framed the unpopular reform as a government project that President Putin has nothing to do with. Nevertheless, confidence in the President has been dented. A clear social response could lead to a weakening of the reform and although the Kremlin has many instruments at its disposal to stem the threat of protests, it lacks the means to regain the trust it has lost. (Autorenreferat

Russia-China economic relations: Moscow's road to economic dependence

Russia's full-scale invasion of Ukraine has fundamentally changed the terms of Russia-China economic relations. Economic cooperation with China has become vital for the Russian economy. Trade turnover between Russia and China has increased significantly since February 2022. However, Chinese companies remain hesitant about investing in Russia. Energy cooperation remains the backbone of Sino-Russian cooperation, but the expansion of Russian exports is hindered by infrastructure limitations. Russian arms exports have declined in recent years. Meanwhile, China exports large quantities of dual-use goods to Russia, which are urgently needed by the Russian military industry. Sino-Russian cooperation in the digital economy has been hit hard by Western sanctions. China's digital giants cancelled several projects in Russia due to fears of secondary U.S. sanctions. Russia's trade with China is mainly conducted in Chinese yuan. However, Russia continues to rely on the U.S. dollar for trade with the rest of the world. (author's abstract

Mounting pressure on Russia's government budget: financial and political risks of stagnation

Economic stagnation and demographic change in Russia are putting intense pressure on the government budget. Tax revenues have been declining since the late 2000s. Meanwhile, the oil dependency of Russia's budget has in­creased significantly. This became patently clear when the oil price plum­meted in 2014. Energy revenues have since begun to recover, but the Finance Ministry’s reserves have shrunk considerably and are only slowly being replenished. To keep public budgets stable, the Russian government is forced to raise taxes and extend the retirement age in the years to come. There is a widen­ing gap in funds required to cover the paternalistic social policies of earlier years. At the same time, the struggle for control of public resources is having a destabilizing effect on the political regime - especially in light of the ever more pressing question of Putin’s successor in the Kremlin. Up to the presidential election of 2018, the Russian leadership avoided making any budget cuts that would have hurt key clientele groups: retirees and the military-industrial complex. Additional income was generated in­stead through a series of smaller budgetary adjustments. Shortly after the start of Putin's fourth term, however, tax raises and a higher retirement age were announced, which lead to drastic declines in the president’s approval ratings. As a reaction to shrinking funds, budget policy is now being controlled in a more centralized way by Moscow, while public oversight of government budgets has been restricted. Shadow budgets have also emerged outside the purview of the finance administration. In this complex and politically tense situation, conflicts between elites are erupting with increasing frequency, bearing risks for Putin's fourth term in office. (Autorenreferat

Russia's Arctic strategy through 2035: grand plans and pragmatic constraints

Russia has adopted a development strategy for the Arctic for the period from October 2020 to 2035. Reflecting hopes and perceived threats associated with the successive warm­ing of the Arctic, it aims to advance development of the region's abundant re­sources, first and foremost oil and gas, and improve living conditions for the popu­lation. In the longer term, the Kremlin hopes to establish the Northern Sea Route as a new global shipping artery. Moscow also worries that an increasingly ice-free Arctic could create new territorial vulnerabilities in its Far North, and is responding by re­building its military presence there. Finally, Moscow also wants to preserve the region's ecological balance. The indications are, however, that the interests of the energy sec­tor and the military will be served, while funding to improve environmental protections and living conditions will remain inadequate. (author's abstract

Dress rehearsal for Russia's presidential election: Moscow tightens grip on regional governors and budgets

Fifteen Russian regions and annexed Sevastopol elected new governors on 10 September 2017. The process reveals the Kremlin's response to rising socioeconomic tensions in Russia's regions: changing their leaders. A string of older regional bosses rooted within their local elites have been forced to make way for a younger generation of political managers over whom Moscow holds greater sway. The regions' financial independence has been curtailed again too. For the Kremlin, this round of voting represented the final test before the presidential election scheduled for 18 March 2018 - and it passed off largely successfully. But the next presidential term will also see growing uncertainty over Vladimir Putin's successor in the Kremlin. These latest centralisation moves are designed to counter potential political risks ahead of time. But they weaken the incentives for governors to invest in the long-term development of their regions. (author's abstract

Importierte Rechtssicherheit: Ursachen und Perspektiven der Nutzung ausländischen Rechts in Russland

Russische Unternehmen nutzen zur Absicherung ihrer Geschäfte untereinander in großem Stil ausländisches Recht und ausländische Gerichte. Das zeigen sowohl die Fallstatistiken ausländischer Handels- und Schiedsgerichte als auch Umfragen unter russischen Firmen. Damit reagiert die Wirtschaft auf die unzureichende Entwicklung des Wirtschaftsrechts und das fehlende Vertrauen in die russischen Wirtschaftsgerichte. Die Nutzung ausländischen Rechts ist eine wesentliche Ursache für die große Zahl an russischen Offshore-Holdings in Zypern und anderen Staaten, die ein Charakteristikum des postsowjetischen Kapitalismus in Russland geworden sind. Eine umfassende Reform des Zivilrechts hat in den letzten Jahren viele formale Gründe für die Nutzung ausländischen Rechts beseitigt. Allerdings ist fraglich, ob dies ausreicht, um die russische Wirtschaft tatsächlich zur Rückkehr in die heimische Jurisdiktion zu bewegen

Russisch-chinesische Wirtschaftsbeziehungen: Moskaus Weg in die Abhängigkeit

Mit dem großangelegten Angriffskrieg gegen die Ukraine seit Februar 2022 haben sich die Rahmenbedingungen der russisch-chinesischen Kooperation fundamental geändert. Die wirtschaftliche Zusammenarbeit mit China ist für Russland überlebenswichtig geworden. Der russisch-chinesische Handel hat seit Beginn von Moskaus Invasion stark zugenommen. Dagegen sind die chinesischen Investitionen in Russland, die ohnehin schon gering waren, seither weiter geschrumpft. Fossile Energieträger bleiben das Rückgrat der russisch-chinesischen Wirtschaftskooperation, wobei jedoch die Infrastruktur für eine schnel­lere Ausweitung der russischen Exporte fehlt. Russlands Rüstungsexporte nach China sind seit einigen Jahren rück­läufig. China exportiert seinerseits immer mehr Dual-Use-Güter nach Russland, die von der russischen Rüstungsindustrie dringend benötigt werden. Die russisch-chinesische Kooperation in der IT-Industrie ist seit Beginn des Angriffskrieges gegen die Ukraine stark zurückgegangen, da die chinesischen Digitalkonzerne US-Sekundärsanktionen fürchten. Russlands Handel mit China wird größtenteils in Yuan abgewickelt. Für den Handel mit anderen Staaten ist Russland allerdings weiterhin auf den US-Dollar angewiesen. (Autorenreferat