Once a superpower, how strong is Russia now?

Jan 14, 2017

Friend or foe? Handshakes or hacks? An uncertain U.S.-Russia relationship has many wondering about the days ahead

Not since the end of the Cold War has Russia dominated U.S. headlines to the degree we’ve seen during this election. According to U.S. intelligence services, Russian President Vladimir Putin is waging a silent, global war against liberal democracy. President Barack Obama recently derided Russia as a “smaller,” “weaker” nation. But according to President-elect Donald Trump and some of his Cabinet designees, friendlier relations with Moscow could benefit the U.S.

Is Russia a growing threat to be feared, or a valuable potential partner to embrace? We look at how Russia stacks up against the U.S. and another rival economic power, China.

Life in Russia

When Putin came to power in 1999, he promised to end the chaos under Boris Yeltsin’s leadership — which critics said was marked by corruption and political upheaval — and help improve the quality of people’s lives. In return, Putin said he expected Russians to let him do as he pleased in politics.

For the past 20 years, life for most Russians did improve. “People were able to take vacations abroad in Turkey or Egypt or the Czech Republic. They were able to send their children to university, sometimes even outside the country. They could remodel their kitchens and put in modern European appliances,” said Hannah Thoburn, a research fellow at the Hudson Institute in Washington, D.C.

The improvement is most notable in larger cities compared to the countryside, where poverty is still a major problem in some regions, said Thoburn. “Some of the villages look like they’re from 200 years ago, while in Moscow you feel as though the world is spinning around you, and there are huge skyscrapers and fancy cars.”

“What Russians are getting in exchange for that lower life expectancy is a Russia that’s far more assertive on the international stage. It might seem a little strange to Americans, but a lot of Russians really regret the fall of the Soviet Union” and the glory it once had, said Thoburn. “This is something else that Putin is giving them, and I think it doesn’t necessarily matter to them that they lose a few hundred rubles out of their pocket every month. They’re willing to make those sacrifices for the good of Russia.”

Life expectancy, which was woefully low, started to go up in the years since the breakup of the Soviet Union, though it still ranks far lower than most Western countries, she said.

 

 

Amid street protests in 2012 over accusations of voter fraud in legislative elections, Vladimir Putin announced his campaign for a second stint as president and his efforts to make Russia great again. Photo by Alexander Nemenov/AFP/Getty Images

Russia’s economic struggles

Russia’s economy is roughly the size of Italy or Canada, and is dependent on oil revenues to stay afloat, said Thoburn. Western countries, including the United States, placed sanctions on Russia when it annexed Crimea, and intervened in Ukraine and Syria. At about the same time, Russia — one of the world’s top two oil producers — saw oil prices plummet from a high of $100 per barrel to about $40 per barrel. Despite a slight improvement in oil prices these days, Russia’s economy took a beating and it is still working to climb out of a recession.

Russia’s economy is expected to improve starting in early 2017, said Yale University’s Christopher Miller, who wrote “The Struggle to Save the Soviet Economy: Mikhail Gorbachev and the Collapse of the USSR”. The International Monetary Fund and World Bank are estimating that Russia’s GDP will grow by 1 or 2 percent over 2017 thanks to a turnaround in the domestic economy and in energy prices, and increasing oil production, he said.

How about the entrepreneurial climate? During Soviet times, Russia was known for its science prowess, and it still has many creative technologists and computer engineers today, said Thoburn. But the demands placed on entrepreneurs by the government tend to suppress new businesses, she said.

Pavel Durov, founder of VKontakte or “InContact” — the Russian version of Facebook — experienced it firsthand, said Thoburn. During the protests, some people were using the social media website to arrange meetings and talk about the opposition. The government asked Durov for information about the users, but he refused and ended up selling the company. Western firms are reluctant to invest in Russian technology startups, because they’re not sure if the companies can maintain control of their own data, she said.

Government control sometimes dissuades not only foreign investors, but wealthy Russians as well, who see it as risky to create new businesses, said Miller. “They’re afraid that whatever they build or whatever they own is going to be taken by the government under trumped-up pretenses.”

 

One of the questions surrounding a Trump presidency is how he will handle sanctions on Russia. “It will be interesting to see if he chooses to unilaterally remove them or keep them in his pocket as a bargaining chip,” she said.

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