Plunging crude-oil prices did not cause Russia's economic problems, speakers said at an Oct. 26 Center for Strategic and International Studies forum. But the Putin government probably will tax the oil and other industries move heavily to raise badly needed revenue instead of addressing more serious underlying problems, they added.
"Officials keep saying the worst is over," said Vladimir Milov, a former Russian Federation deputy energy minister who now chairs the Democratic Choice political party there. "I think the real troubles are just beginning, with no clear view of how the situation will get better."
Russia endured a sharper crude price decline in 2008 without a comparable currency collapse, Milov said. Economic sanctions in response to activities in Ukraine were the difference this time because outside capital sources wonder who Russia will invade next, he said.
"It is no secret Russia's major oil fields are largely depleted, despite official number showing some growth," Milov noted. "This is largely delivered by the new, smaller players. The larger ones are declining. More drilling is essential. It looks like the government will try to take a bigger bite."
Ilya Ponomarev, a member of the Duma, the lower house in Russia's parliament, agreed that sanctions hurt, but added the central government's social decrees since 2012 have caused more damage. He said the trend for Putin's United Russia party is not that favorable in regional elections, although it will keep its majority.
"Historically, economic difficulties by themselves have contributed to, but never triggered, social unrest," Ponomarev said. "During the last year, prices for groceries went up by two times. People blamed US sanctions and supported President Putin, even though support for the war in Ukraine slipped significantly."
No clear energy policy
Ilya Zaslavskiy, a Chatham House nonresident academy associate, said Russia has no clear energy policy despite the government's energy tools rhetoric. The government is obsessed with building a natural gas pipeline around Ukraine and reaching new agreements with China, he said, adding, "But Chinese banks aren't giving the amounts which were expected and Russian banks have to step in."
Zaslavskiy said, "The momentum is with other countries. The European Union has developed a proper energy security view with decarbonization, transparency, and diversity. Countries take more oil, but their attitude toward Russian gas is more residual because they need it only during peak periods."
Sergey Aleksashenko, a former deputy chairman of Russia's Central Bank who now is a Brookings Institution nonresident senior fellow, said investments in Russia's economy quit growing in 2013 and have declined ever since. "The economy will stagnate until the government shows it is ready to protect property rights," he predicted.
