The war unleashed by Vladimir Putin in Ukraine will have grave consequences for Russia—political, economic, and cultural.
However, contrary to the Kremlin’s thinking, Russia’s importance on the world stage, which is being rapidly reconsidered today, is in fact not so great.
Modern Russia is beginning to fade into the past.
Just a few years ago, speaking in the propaganda documentary “World Order 2018” by journalist Vladimir Solovyov, based on the canons of Joseph Goebbels, Vladimir Putin talked about Russia’s right to respond to a nuclear strike without feeling pity for the soon-to-be-annihilated world.
“As a citizen of Russia and the head of the Russian state,” the president said, “I want to ask myself the question: ‘Why do we need such a world if Russia is not in it?’”
However, history has taken a somewhat different path: no one has started a nuclear war against Russia, and it has not yet used and is unlikely to use nuclear weapons, but the “world without Russia,” this nightmare of its long-term dictator, is materializing before our eyes.
It takes the form of a huge space, with barely any airplanes flying over, no money being transferred, no goods making their way in or out; a country whose influence on the world economy is rapidly being reconsidered; a society whose representatives will remain outcasts in the civilized world for decades to come. And all it needed was three weeks of war and the temporary occupation of parts of neighboring Ukraine.
What is happening today before our eyes is the result of a series of strategic mistakes made by President Putin in his assessment of himself, his country, its role in world politics, and its economy.
Over the past twenty years, Russia, it seemed to him, had risen from its knees and challenged the West. But it did so mainly through alliances with countries like Iran, Venezuela, Syria, or Belarus, and through disseminating myths about its power, which its leadership eventually ended up believing.
However, for at least the past ten (or rather fifteen) years, it has become increasingly noticeable that a world without Russia is very real (and in part, even more comfortable), and its presence in the global community is maintained by nothing more than inertia.
By 2008, after ten years of economic reforms and economic growth, focusing on cooperation with the West or its individual members, having built a mass consumer society in general terms and even having made a formal democratic rotation of the Kremlin’s leader, Russia achieved peak success.
The country’s share of global GDP rose to 4 percent; the ruble, which collapsed in 1998-1999, had been growing steadily for five years; the average dollar income of citizens had grown 7.9 times since 1999; the Russian stock market had become one of the fastest growing in the world, and Gazprom’s capitalization—which is now impossible to believe—had exceeded that of Microsoft. Investments flowed into the country and many professionals sought to work there. Even the 2008 military operation in Georgia did not cause serious disagreements with the West and was replaced by a cheerful “reset.”
However, these achievements were based, by and large, on one factor only—Russia’s natural resources. Having restored its oil production, the country supplied the world market with 7.5 million barrels of oil per day (13.3 percent of the volume traded on international markets) and 226 billion cubic meters of gas per year (29.7 percent of the same indicator).
Russia was also the world’s third largest exporter of coal and the second of mineral fertilizers, and by the mid-2010s it had become the top exporter of wheat as well as titanium, nickel, and palladium. At the same time, Russia remained the only member of the G8 with practically no modern production facilities and was 100 percent dependent on the import of computers, smartphones, cellular equipment, and various types of medical equipment and pharmaceuticals.
The import of equipment and its components was of critical importance for most Russian manufacturing industries and even for the agricultural sector. The dominance of foreign technology in aviation was overwhelming, as was the number of foreign cars on Russian roads. By the early 2010s, the country had lost its status as an exporter of industrial goods, even to developing countries. The failure in the fields of technology and education could no longer to be corrected, the brain drain was growing.
However, the Russian leadership did not want to face facts, hiding behind myths about economic self-sufficiency and Potemkin villages, like Skolkovo.
The Kremlin believed that Russia, with its supplies of 45 percent of gas and 25 percent of oil imported by the EU, with huge reserves of non-ferrous metals, with its status as a major market for many Western companies, and, finally, with its nuclear weapons and the “controlled instability” tactics it created throughout the post-Soviet space, was a partner that the West could not turn away.
And this was partly true, as politicians around the world continued to repeat that “not a single global problem can be solved without Russia,” and that “it cannot be allowed to fall into China’s arms.” As a result, the West spoke with Moscow extremely softly, step by step emboldening the Kremlin leadership to risk new adventures.
Russia’s invasion in Ukraine overturned all existing ideas not only about the boundaries of what is permissible, but also about Russia’s significance for the world.
Not only the state of the Russian army, to which the Kremlin’s stooges devoted dozens of articles in the U.S. press, was exposed, but also Russia’s place in the world economy. Leaving the country, McDonald’s will lose only 5.2 percent of global sales, Coca-Cola less than 2 percent, Volkswagen 1.8 percent, Apple 1.3 percent, and Microsoft 0.06 percent.
At the same time, it turned out that good money can be made by resisting violence: Deutsche Bank, whose profits from Russian operations in 2019 amounted to $20 million, recently announced its withdrawal from the country, thus provoking an 8-percent spike in its shares on the Frankfurt Stock Exchange, which increased its market capitalization by $1.68 billion, or by the amount of hypothetical profit from working in Russia for 84 years.
Russian stocks, on the other hand, were almost completely wiped out: Sberbank’s stocks crashed to 1 cent per share in London before its trading was halted on March 3, and the world market did not even notice.
The closure of the European skies to Russian aircraft has reduced daily air traffic in Europe by 0.4 percent, and flights through Siberia, once vital for Western airlines, can easily be sacrificed, as over the past twenty years, long-haul airliners have increased the time of non-stop flights from 12-13 to 16-17 hours and can go around Russian territory.
Of course, Russia’s most important domestic “advantages” remain in the shape of oil and gas, which Europeans will not give up instantly. However, even here the trend is obvious: the U.S. has already stopped imports, the UK will follow suitby the end of the year, and most EU countries in 2024-2025.
Russia will gladly be forced out of the market by those who have been patronized by the Putin regime—Iran and Venezuela, which can supply up to 3 million barrels per day if sanctions are lifted.
The remainder can be compensated through increased production in the Gulf countries and shale deposits in North America. If Europe cannot abandon Russian, it can temporarily increase more backward types of energy generation, out of principle, to rapidly reduce purchases in Russia.
Given the options of increasing public debt, no rise in oil and gas prices can either stop economic growth in the West or force the countries of the free world to seek compromises with Russia. In the very first week of the war, it became clear that the common interests of Western countries outweighed the economic arguments in favor of cooperation with the aggressor.
It is especially important in this case that Russia has not been able to become the world’s producer of any of important services or critical technologies.
Currencies, which play an exceptional role in the modern global economy, are issued not in Moscow, but in Washington, Frankfurt, and London, while the Bank of Russia plays the role of nothing more than a piggy bank: on the Fed’s balance sheet, Russian reserves are about 0.4 percent; on the Bank of Russia’s, until they were reset to zero by sanctions, they amounted to 81.3 percent.
Possessing a huge territory and considering itself a “bridge” between Europe and Asia, Russia transported along the Trans-Siberian Railway and the Northern Sea Route together about 2 percent of the volume of transit cargo passing through the Suez Canal.
Most successful global companies use Microsoft and SAP software; quality standards in computer technology are set by Apple and HP; microprocessors are manufactured by Cisco and AMD; leaders in the automotive industry are Daimler and Ford (and, in the future, Tesla); satellite Internet is being developed by Starlink and Amazon.
Russia is not represented in any market of such goods, which proudly bear a “Made in …” stamp. If you do buy something Russian, it will likely be for the sake of exoticism. No one depends on critical Russian technologies, uses Russian patents, sends their children to Russian universities.
Most technology companies founded by Russians in the last decades, from Telegram to Revolut, were created after they had left Russia.
The total citation of Russian-speaking scientists living outside the country significantly exceeds the citation of those still working in it.
Vanishing from the world, Russia now evokes comparisons with the famous unopened fifth ring at the opening ceremony of the 2014 Sochi Olympics.
Today, it still seems to many that most countries that are imposing ever more radical restrictions on Russia are striving to contain or teach the country a lesson, but this impression will soon dissipate.
The containment of Russia has now become the burden of… Ukraine. For this neighboring country, it is a matter of life and death, as for the Soviet people was the fight against Nazi Germany.
For the rest of the world, Putin’s fantasies are as uninteresting as before: a Russia-less world is seen by most businesses and politicians as preferable to having to deal with this unpredictable country. A few years will pass, and this sentiment will be strengthened many times over, becoming impossible to overcome.
The Western press and the Russian blogosphere are now debating the question of how many years or decades Putin’s decision to invade Ukraine will set Russia back by. From an economic point of view, the mooted 20 or 30 years may seem reasonable, but in my opinion, that is not the issue.
Russia (the Soviet Union or the Russian Empire) may have acted in unison with the Western/European world or played against it, but it always has been a significant factor in the latter’s development for nearly five hundred years.
These past centuries, try as it may, the world could not ignore Russia—politically, economically, culturally. It looks like this era is coming to an end. Russia, as I said a few years ago, is unfolding in its development and receding into the past, while the rest of the world is accelerating into the future.
In attempting to respond to the loss of a part of its territory—a loss that has turned the state that calls itself the Russian Federation into its territorial predecessor of the 1648 kind—Russia is reverting back to Muscovy, a land outside the zone of interest of the ordinary European, a country immersed in Byzantine intrigues, occasionally exporting hemp or wax to developed countries. Modern Russia is over.
A world without Russia, even if anathema to the Kremlin, can only become better than the world in which this once great country played, it would seem, an everlasting role…