In his piece for the Washington Post, Matt O’Brien writes about the Russian economy’s recurring woes due to its dependency on the international price of oil. O’Brien argues that Putin’s Russia is not so different from the Soviet Union of the “bad old days”. The author recounts how the oil shocks of the 1970s allowed the USSR to mask the inefficiencies of its centrally planned economy, and how the USSR later abruptly disintegrated when Saudi Arabia began letting oil prices fall. Ultimately the Soviet economy largely collapsed. The author suggests that a decline in the price of oil is what effectively ended the Cold War, causing Russia to borrow heavily from the West and to remain deep in debt to this day.
O’Brien writes that Russia today still does not have a “real” functioning economy, but rather relies on an oil exporting business that subsidizes everything else. He argues that the Russia of present day has simply traded one “gangster state” for another. Highlighting Russia’s bankruptcy in 1998 when gas prices again took a tumble, O’Brien writes that Putin’s government has only survived this long because of China’s rise and increased demand for oil through the 2000s. Until recently, Russia had been flush with “petrodollars”, causing the ruble to rise and emboldening Putin to act aggressively on its neighboring countries. Recent EU and US sanctions shutting Russian companies out of international credit markets coupled with the crash of oil prices and the ruble are making debts to the West a lot more difficult to pay back, and in turn sucking the Russian economy into a “death spiral”.
The opinions expressed in the article summary above are the opinions of the author alone and not that of Global Summitry or its staff, editors and or advisers.
O’Brien, Matt. “Putin’s Groundhog Day: The Russian people keep paying the price for their leaders’ incompetence”. The Washington Post. 21 December 2014. The Washington Post Web.