Russian economy has belied doomsday predictions

Aunindyo Chakravarty

Senior Economic Analyst

TWO years ago, Russian tanks crossed the border and rolled into Ukraine. Russian President Vladimir Putin’s action reminded many of what had happened some eight decades earlier, when Hitler’s troops had invaded Poland. That had triggered a World War that would kill nearly 80 million people across the globe. It is widely accepted that Hitler’s expansionist adventures and the Nazi ideology got widespread support from ordinary Germans because they resented the unfair hand that had been dealt to Germany after World War I. Similar arguments have been made for Putin’s overtures. Russia’s invasion of Ukraine has been seen as a ‘last resort’ reaction to NATO’s expansion into Kremlin’s backyard.

That is where the comparison ends. Those times were different. The world was dominated by imperial powers, which had carved the earth up between them. Now, imperialism is hidden. It operates through regime changes and policy impositions on weaker nations. Former colonies, like India and China, not just account for one-third of the world’s population, but together make up more than one-fourth of the global economy. Europe is in decay, while the US is fighting a losing battle to remain the world’s sole supercop.

Thirty years ago, as the Soviet bloc collapsed and US-dominated international financial institutions remade national economies after the West’s image, it looked like the world would gradually become a unified market: The global North would provide capital and own assets everywhere, while the South would provide cheap labour. The mythology went that wealth would trickle down from the rich nations to the poor, and the free flow of finance would raise all boats together, even if some were giant ships and others tattered catamarans.

That world, too, is behind us now. Globalisation is now officially dead, except where it means opening doors to Western capital. The formerly developed nations are raising tariff walls and non-tariff barriers to protect their own economies from the newly developing nations, China and India. At the same time, every government knows that the future belongs to artificial intelligence and ‘clean’ energy. There is now a global race unfolding for control over natural resources necessary for making electric batteries and computer chips. Much of these lie in African nations, which has led to major powers fighting for political influence in the continent. Russia’s war in Ukraine and its political economic fallout can only be understood in the context of the end of globalisation and the revival of neo-imperialist rivalries.

For starters, all doomsday predictions for Russia’s economy have proved to be misguided. The consensus analyst estimate about Russia’s GDP is that it has grown by more than 3 per cent in 2023, instead of contracting due to sanctions imposed by the West. India is among the nations being blamed in the Western press for helping Putin beat the odds and continuing to finance his war. We are among the biggest buyers of Russian oil, along with China, Egypt, Turkey and several other non-Western nations. This has helped Russia’s oil exports grow steadily in the past two years. In fact, Russian oil companies have drilled more wells since 2022 than they did in over a decade before that.

If anything, European nations have suffered the most due to the restrictions on Russian gas imports. They have paid with wallet-busting gas bills and runaway inflation. This has caused a deep shift in public opinion in Europe. One year ago, there was widespread support for NATO’s sanctions on Russia and for backing Ukraine’s war effort. A recent poll shows that now only 10 per cent of Europeans believe that Russia can be defeated. Almost half the respondents believe that Ukraine should be pushed to accept a negotiated settlement. One in three believe that the war in Ukraine has had a direct impact on their country.

One reason why people in Europe want a truce now is because of the growing possibility of Donald Trump returning as the US President after this year’s elections. Trump’s position on the war has been ambivalent, at best. In a phone interview with Fox News in March 2023, Trump had said that, if he had been President, he would have quickly brought the war to an end by letting Putin “take over something”, referring to “certain areas that are Russian-speaking” in Ukraine. Trump’s towering presence in the race for the Republican nomination has forced party members to block financial and military aid to Ukraine.

Trump has also attacked NATO allies for not spending enough on their own defence. Since the end of the Cold War, NATO allies had cut their defence spending, while the US bore most of the costs. Ten years ago, NATO members agreed to raise their defence budgets to 2 per cent of their GDP, after Russia annexed the Crimean Peninsula. Despite that agreement, only 18 out of 31 NATO members have met their spending targets. Trump has made this an election issue, saying that as President he would encourage Russia to do “whatever the hell they want” to NATO countries who do not “pay their bills.”

Putin, meanwhile, is trying to build geopolitical bridges in Africa, offering the services of the Russian private militia, the Wagner mercenary group (rebranded the Expeditionary Corps), to help authoritarian African leaders with ‘regime survival packages’. This is a new threat to the West, which has refocused its attention on controlling African nations for their natural resources.

As India emerges as a global power in its own right — both due to its economic heft and potential as an ally against China — it is in our interest to keep doors open on both sides. That is precisely what S Jaishankar meant when he responded to a question on India’s ties with Russia by asking: “Why would a country restrict its friends? I am focusing on how to expand my relationships.”

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