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The future of Russia in the post-global world

  • Meeting in hybrid format - Rome
  • 6 July 2022

        The war Russia has unleashed on Ukraine is having a global effect, especially in the energy sector and on the economy more generally, in what was already a considerably unstable global environment.  Despite the fragmentation or regionalization of some phenomena now underway, globalization continues to be a fundamental reality for today’s world, in terms both of trade interdependence and, even more critically, of financial connections – sectors where the West clearly remains predominant. If anything, the challenge lies in governing these global processes, which is becoming increasingly arduous in light of geopolitical tensions.

        The tangible impact (direct and indirect) of the sanctions on the Russian economy confirms the importance of global trade flows. Indeed, even a country with strong government control over the economy cannot entirely insulate itself, especially if it hopes to maintain the consumer levels to which its citizens have grown accustomed. Looking at commodities and essential goods, the Russian economy can certainly not be said to be collapsing; nor is the situation comparable to Ukraine’s – the latter is burdened with extensive physical destruction. Yet, Russia’s economic picture has changed for its middle class (as seen in the data on employment and, to some extent, inflation), and it is hard to predict the depth of the sanctions’ impact in the second half of this year.

        It is important to note that the structure of the Russian economy is not particularly resilient, given its heavy dependence on energy exports and scarce capacity for major diversification or innovation. The government’s real comparative advantage lies in its ability to repress or neutralize political dissent and in citizens’ general inclination to limit their expectations.

        For precisely those reasons, the evolution of the economic situation in Russia will depend a great deal on the possible embargo of Russian gas and oil and, obviously, to the willingness of purchasers such as China and India to replace traditional European importers. The problem for the West, on the other hand, lies in the ability to count on a public opinion increasingly inclined to blame the approaching recession on the war and on Western governments’ involvement in it.

        In any case, despite the economic costs and risks, the Russian leadership has no intention at the moment of changing the basic objective of its military approach in Ukraine: annexing enough territory and exerting sufficient political influence over Kyiv to declare “victory”. This involves securing Donbas – and possibly creating a sort of buffer zone beyond the Donbas borders – and a series of legislative concessions by the Ukraine government limiting the presence of extreme right-wing parties or movements (i.e. the so-called “denazification” mission). Although a truce at the very least could be imagined, nothing – maybe not even some form of multilateral assurance – can guarantee that hostilities will not flare up again. According to some participants, the most likely scenario is a partially “frozen” conflict with no prospects for true stabilization unless something changes on the Moscow political scene.

        Following a phase of considerable and perhaps excessive optimism, EU-Russian relations since 2008 shifted first toward greater pragmatism and now to widespread pessimism. Underlying economic and political interests may not have changed radically, but mutual perceptions have made an abrupt about-face. This above all because of Moscow’s application of nineteenth century criteria to territorial issues and nationalism. Over the medium term, Ukraine’s physical reconstruction will be a key question. This will also be closely linked with the accession process that Kyiv has formally launched with Brussels.

        As for NATO, the trend seems to be in the direction of a “new Cold War”, already evident in the strengthening of Europe’s military defenses. And this time, competition has expanded to include China – Russia’s principal ally. Meanwhile, a broad segment of countries in the rest of the world hover in a state of uncertainty regarding this emerging “bipolar” scenario. Their role will be decisive in shaping the international system. Awareness of widespread uncertainty is another reason for taking a cautious and pragmatic rather than punitive attitude toward Moscow. For any such efforts to work, however, Vladimir Putin must send some clear sign of minimal negotiating rationality – a sign that for the moment is not forthcoming.