Put simply, Russia lacks the resources to fund its great power pretensions. Consider these five factors.
1. Russia’s economy is weak
Let’s start by remembering that the U.S. economy is ten times the size of Russia’s. Even during the heady days of high oil prices, Russia was unable to compete with American economic might.
Those days are now long gone. Over the past decade, hydrocarbon exports accounted for roughly 50 percent of government revenue. With oil prices hovering above $100 a barrel for most of the past five years, Russia experienced an economic boom. Indeed, between 2000 and 2013, Russia’s GDP grew almost ninefold, one reason for Putin’s considerable support.
But the recent collapse in global energy prices hit Russia hard, wiping out many of the economic gains of recent years and sending the economy into recession. Moreover, the outlook will not improve any time soon as Russia’s economic growth in 2017 is expected to be minimal.
To prepare for the post-oil era, the Kremlin created a “rainy day” reserve fund from surplus oil and gas revenue in the 2000s. With the drop in oil prices, the government dipped into the fund repeatedly. Since 2014, Russia’s national nest egg has decreased from $87 billion to barely $16.18 billion. The country has another sovereign wealth fund that contains $73 billion, but much of that money has already been allocated.
The economic downturn has already had significant consequences. The World Bank reports that 21.4 million Russians, or 14.6 percent of the population, now live below the national poverty line and the number of Russians earning less than $10 a day has increased 8 percent. In fact, a recent survey found that 41 percent of Russians had difficulty saving enough to buy food and clothes. The Economic Ministry predicted that there would be no improvement to average living standards before 2035.
2. Russia is facing a demographic crisis
Russians are not having enough children. The country’s fertility rate stands at 1.7 births per woman, far short of the 2.1 births needed just to ensure population replacement. Moreover, Russia’s young men are dying far too early. The average male life expectancy is 64 — lower than that of North Korea and a full 15 years less than that of Germany, Sweden or Italy. This is due to unusually high rates of alcoholism, smoking, untreated cancer, suicide, tuberculosis, AIDS and violence.
In 2012 the WHO attributed 30 percent of all deaths in the country to alcohol; 12 million Russians regularly ingest surrogate alcohol such as medical ethanol, window cleaner and perfume. Russia is suffering an AIDS epidemic, and in the country’s third-largest city, Yekaterinburg, one citizen in 50 has HIV. Similarly, Russia’s homicide rate is 11.3 per 100,000, much higher than the OECD average of 4.1 (Britain’s homicide rate is 0.2).
3. Russia can no longer afford to buy off its troubled regions
Moreover, Russia’s economy is highly regionalized. Just 14 of Russia’s 83 regions add more to the federal budget than they receive in subsidies. Continuing transfers to remote or non-Russian regions may provoke a popular backlash and will restrict Moscow’s ability to prop up separatist enclaves in Ukraine, Georgia or Moldova.
4. Russia will have to reduce military spending.
The state of Russia’s economy largely determines its military spending. In 2017 Russia will spend 30 percent of its budget on the military and security services, with only 2.3 percent going toward health care. Because of economic stagnation, in 2016 Russia’s defense spending declined for the first time since the 1990s. By 2020, Russia is projected to spend only $41 billion on the military. That’s less than France spends, with only 46 percent of Russia’s population. Furthermore, spiraling costs in Syria and Ukraine could either force early Russian withdrawal or bankrupt the regime. Indeed, a Russian newspaper recently revealed that the government spends $1.8 billion a year just on military contractors in Syria.
Right now, Putin can be assertive because the Russian budget prioritizes guns over butter. Putin’s regime has effectively traded economic well-being and social spending for military might. This bargain cannot hold indefinitely.
Consider, for instance, Russia’s crisis in health care. Roughly 85,000 rural communities have no medical infrastructure whatsoever. Russia came last in Bloomberg’s latest health-care efficiency survey, behind 54 other developed economies. Yet the government plans to cut health spending by 33 percent next year, bringing spending down to just $5.8 billion. The Ministry of Health will receive less than 2 percent of the funding requested for 2017-2025. Salaries for doctors in the poorest regions can be as low as $250 a month and will probably drop further.
All this is made worse by the systemic corruption that plagues health-care programs. For instance, in 2015, the Compulsory Medical Insurance Fund simply “lost” more than $500 million.
5. Chronic social problems will ultimately upend Russia’s politics
Russians are famously stoic, but they are not automata. Putin’s popularity is founded not just on media manipulation and drum-thumping jingoism but on real economic gains. As Daniel Treisman has shown, even in authoritarian states, economic growth is tied to popular approval.
Russia is not a Stalinist dictatorship but a “managed democracy.” A prolonged economic downturn will change attitudes. No matter how powerful or threatening Russia may seem right now, the current situation can’t last. Russian stability — and Putin’s regime — rest on shaky foundations and the cracks are beginning to show.
Joss Meakins is a graduate student at Columbia University’s Harriman Institute studying Russian politics and security.