Russia’s Oil Curse, Militant Aggressiveness, and Worsening Prognosis Under Putin

More: A dissident Russian view of Putin’s aggressive weakness in the Ukraine

The Russian military’s move into parts of the Ukraine, including Crimea, has international news media and diplomatic channels buzzing. But no one who has been paying attention is at all surprised. Russia is playing the part of a former superpower that is jealously guarding its neighborhood, while attempting to protect its dominant position as the main supplier of natural gas to both Eastern and Western Europe. Without those gas revenues, the Russian government begins to collapse. More here.

Though she sees herself as a great power, Russia is still a developing nation with all of the maladies and curses under which developing nations suffer. Russia is also struggling with a steady depopulation of ethnic Russians from Siberia, with a somewhat slower de-Russification of Russia west of the Urals — along with a steady replacement of ethnic Russians by Muslim immigrants in all regions.

And one of the biggest reasons why Russia is still a lagging, underdeveloped nation, is The Oil Curse.

The Oil Curse is a potentially deadly cluster of problems that underdeveloped nations suffer whenever they depend too heavily upon oil & gas income to finance government spending and their general economic well-being.

  1. Extreme dependency on price volatility
  2. When oil & gas prices remain high for even a short period of time, oil curse nations tend to overspend and overproject future earnings and future spending.

  3. Lack of diversification in the economy
  4. When a nation has only one profitable industry, the entire government and economy can glom onto that industry to the neglect of a potentially healthy and diverse economy.

  5. Over-centralisation of power with persecution of people and ideas that are not connected with or protected by the inner circle
  6. This describes a quasi-totalitarian society, which is what Russia is evolving back toward.

  7. Massive corruption within the inner circle and its cronies
  8. A perfect description of modern Russia under Putin.

If one does not understand Russia’s modern oil & gas curse, the actions of Russia’s corrupt oligarchy are likely to seem incomprehensible.

Rather than acting in the best interests of Russia or her people, Putin is only acting in the best interests of his corrupt inner circle of oligarchs.

When there is no demand for talented and innovative Russians in their own country, it is inevitable that they will seek better and more productive lives in other countries. As a result, Russia is turning into a blank space on the world map. _Moscow Times

Not only is Russia suffering a “brain drain,” it is also suffering a “womb drain” — a steady out-migration of its fertile young women. __ Brain Drain vs Womb Drain

Russia’s people need a more diverse economy with less violent organised and unorganised crime, and more economic opportunity. But that is the least of Putin’s concerns.

“The one remedy that can help everywhere is greater transparency in how governments collect, manage, and spend their oil revenues,” Ross writes. __ From a review of Ross’ The Oil Curse

Greater transparency in how the Russian government collects, manages, and spends its oil & gas revenues would be a dire threat to Putin and his cronies. So it will not happen.

As Russia’s population of ethnic Russians continues to shrink, Putin and the inner circle continue to pursue the hopeless quest of surrounding Russia with vast buffer zones of “safe” land. All of this while simultaneously re-expanding Russian zones of control.

At the least, Russian leaders want to expand the zone of nations dependent upon Russia for vital supplies. And they cannot do that if Russia’s former satellites choose to go off on their own, and develop their own resources independently of Russia.

After all of the old former Soviet officials die off, a new generation of Russians may arise with more genuine concern for their country and countrymen. But given hundreds of years’ history of authoritarian rule in Russia, we are unlikely to see a turn to the rule of law or general meritocracy any time soon.

A final note: Putin has earned a significant popular following in western nations, much as Stalin, Hitler, Castro, and Hugo Chavez earned popular followings in the west, in their own time. Human beings are always looking for heroes and champions, and often fantasize such characters in the unlikeliest places.

But once one looks beyond the fog of his own fantasy needs to the deeper realities of human nature and the particulars of the strong-men themselves, it becomes easy to detach them from one’s more personal concerns.

HFTB-PFTW. It is never too late to have a dangerous childhood.

Google Books: Michael Ross The Oil Curse preview

The oil curse in Africa

What happens to oil-cursed nations when oil & gas prices fall? (a 1982 Daniel Pipes look at oil-cursed Arab states in an oil downturn)

Articles on Russia in the original Al Fin blog

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This entry was posted in Demographics, Economics, Russia, Russian Oil Curse and tagged . Bookmark the permalink.

5 Responses to Russia’s Oil Curse, Militant Aggressiveness, and Worsening Prognosis Under Putin

  1. Matt Musson says:

    In every international crisis you have to ask yourself, “What is the stupidest thing that Obama can do in response to this?” In this case, it would be to negotiate away our Nuclear arsenal to ensure “Peace in our time.”

    Since he already hates our nukes and thinks it is unfair for the USA to be strong – I expect he will try and slash our arsenal by executive order.

  2. bob sykes says:

    Europe also suffers from population loss, and parts of the European countryside, including especially Italy, Spain, Greece and East Germany are depopulated. And population loss is also happening in China, Korea (both) and Japan. The US’s white population also suffers from low fertility. Below replacement fertility is a developed nation problem and not peculiar to Russia.

    As to the Ukraine, the current situation is the result of US/EU aggression. The US/ EU insists that the Ukraine be part of both the EU and NATO. Russia (and Putin, the elites and the people are united on this) regard the Ukraine and Belarus as an integral part of the Russian heartland. Like Ohio in the US or Kent in England. They also believe the current situation with independent governments in Belarus and Ukraine is a temporary aberration.

    Putin, with the support of the Russian people, is prepared to go to war to prevent the integration of Ukraine into NATO. Russia might permit Ukrainian membership into the EU. The annexation of Crimea into Russia is permanent and cannot be undone short of nuclear war. The only possibility of peace is for a Russian friendly government in Kiev. However, there is a significant fascist/racist element in the current ruling coalition that is virulently anti-Russian. Of course, there are plenty of reasons in history for this element, but they combined with US/EU intransigence could spark a large-scale European war.

    The utter stupidity, arrogance, delusion and aggression of our ruling class is stunning. They are very close to igniting a nuclear war, as close as the Cuban missile crisis, and they are utterly unaware of what they are doing.

  3. alfin2101 says:

    Interesting points, thanks.

    I can’t help but wonder why Russia’s elites are sending their money and their families abroad. Why Russia’s best thinkers and workers are trying so hard to emigrate. Why resource-rich Siberia is being emptied of ethnic Russians. Why Russia’s women are taking every opportunity to get out — even going so far as to become strippers and prostitutes by the hundreds of thousands around the world. This steady loss of human potential and monetary resources sounds an ominous tolling across the steppe.

    Russia is disappearing as we watch, yet many people continue to look at Russia and see the USSR at the peak of its power and population. That is why so many analyses of Russia go so far astray. They are looking to the past rather than the future or even the present.

    There is no hurry to make long term accommodation with the cachectic bear.

  4. Robert says:

    As a European, I find this analysis a little insular.

    Putin: it’s worth remembering that the existing oligarchy replaced a looting of Russian assets with the approval of the West under the Yeltsin adminstration, who came to power in the same way as the current ‘interim’ Ukrainan government. A motley collection of hard men and disfavoured apparatchiks were led to the vodka buffet and told they were in charge while a largely Jewish mafia stole everything in sight. In between the murder of Anna Politovskaya, the doubts around the bombing of the Moscow apartments that started the second Chechen war and the consititutional shenanigans around president/prime ministerial posts, Putin has little claim to be a nice person, but to my knowledge he doesn’t put foreign nationals in cabinet posts, keeps control of his borders and treats minorities as, well, minorities.
    Short term perspective: The West has already capitulated the Crimea, and IMHO the UK will not be part of any sanctions against Russia. Simply because the Russian elite is a good customer of what London provides – Kensington townhouses, Aspreys and Rolls, good schools and discreet access to their cash, witness the London subsidiaries of the Cypriot banks providing withdrawal facilities to their ‘international’ customers while the Cypriots themselves were waiting for their haircut.
    Differential diagnosis on the ‘oil curse’: I agree with the overall analysis, but looking at the other cases where the curse is operative, one does see a difference – Libya? Nigeria? Brazil? Saudi Arabia? Other Gulf States? The first, before the recent NATO overthrow of the Gaddafi regime was certainly no worse for human rights than Saudi Arabia or the rest of the Gulf, but it didn’t provide access to Western companies. Now it does, but other than that it’s a factionalised basket case. Nigeria has no indigenous extraction ability and is a fervid kleptocracy. Brazil is peaking and despite ‘democracy’ has a worse Gini coeffecient than Russia, though it has managed to develop some indigenous global manufacturing. Finally, we have the USA, which does not have the oil curse, per se, but appears to have developed printing money as a substitute.

    • alfin2101 says:

      Thanks for the comment, Robert. Although it is not likely that you are speaking for the entire continent of Europe, as you imply, you do seem to have a lot of interesting ideas.

      As to the future of Russia under Putin, one must resolve the problems repeatedly mentioned above and in the above links:

      The ethnic Russian depopulation of siberia
      The persistent brain drain of Russia’s best
      The persistent womb drain of Russia’s women
      The persistent capital flight from the corrupt inner circle to overseas banks
      The persistent movement of families of the elite overseas
      The hopeless dependency of a shrinking Russia on the volatility of energy prices
      The ubiquitous sense of hopelessness among Russians
      The public health disaster of suicide, drunkenness, drugs, TB, HIV, violent crime
      The steady replacement of ethnic Russians by uneducated muslim immigrants
      The impossible business environment inside Russia killing the private economy
      The disappearance of any meaningful speech and other freedoms under Putin
      The steady decay of Russia’s military and military industrial infrastructure
      The constant infringement on wealthy Siberia by non-Russian interests
      and the list goes on endlessly.

      These are not insular views by any means, nor does any one commenter represent the viewpoints of all of Europe. One never arrives at the truth, but one approximates the truth over time by resolving the contradictions between all that can be demonstrated or proven.

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