Monday, 4 June 2012
Brittle BRICs - Russia
Russia was named as one of the BRIC's due to its potential, more than its delivery of a great economy. After the 1990 revolution, the Communist superpower was down, but given it s vast lands and population, it was surely only a matter of time until it came back to prominence.
Unfortunately, the Oligarchs soon got to work making sure that the wealth of the Country was divided amongst the few again. However, they managed to secure major foreign investment (see BP today!) which has helped modernise the economy.
With ample resources, Russia has much to export to the world and this is the basis of its modern economy. Gas exports to Europe in particular but also plenty of oil and ore.
What that does leave is a Country vulnerable to external shocks. Much like the Middle East dictatorships, the budget is decided by the oil price each year. How much can be spent is therefore dependent on the markets. The Russian stock market is one of the most volatile in the world - in 2009 it dropped 60%.
Of course the main problem in Russia is the lack of the rule of law and the huge corruption that goes with it. Even journalists are not safe and there is much suspicion about state backed assainations and other nefarious activities. Due to this Foreign investment has fallen off and as with BP already mentioned, even profitable businesses are too much effort and too dangerous for foreigners to contend with on a large scale.
Russia too remains a rogue state in the world, determined to see off the West where it can and protect its allies at all costs. Co-operation with Iran and the current stalemate in Syria show just how seriously Russia views its role.
At the last election though there were signs that the middle classes have had enough of the political charade. Russians in general have a poor lot, men with a terrible death rate and the Country is shrinking in population (although recent policies on taxes have slowed this right down from a Japan style peak),
If the West suffers more and commodity prices continue to fall, we can guarantee Russia will suffer a bad recession. As such, it is perhaps the brittlest of the BRICs.