With the current oil prices the Russian economy has found itself in a recession and is already using its rainy day funds to keep its regions from bankruptcy. It is estimated that by the end of 2017 Russia will no longer have the cash reserves to bail out its regions. With worsening economic conditions inside Russia the regime might face internal uprisings threatening to bring down the regime. In order to maintain the necessary social cohesion Russia will be expected to intervene more abroad to keep attention away from its internal problems.
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| Economic troubles might slow Russia's military modernization such as replacing it's tank forces with the new Armata tank |
Oil prices have been at an all-time low in recent years and this puts an economic burden on every oil producing country. Russia is among the countries that have been hit the hardest. Its economy is dependent on oil and gas deliveries to the European Union and China. It is estimated that the Russian economy needs oil prices to be around 100 US dollar to keep its economy working but Russia could compromise to prices as low as 50 US dollar. At the time of this writing oil prices were as low as 33.44 US dollar.
These low oil prices have placed the Russian economy in a recession, forcing the government to decrease its spending. What is even worse is the fact that several of Russia’s regions are in heavy debts and require government aid to keep functioning. With low oil prices and an economy in recession the Russian government has to use its own cash reserves, so called rainy day funds, to keep these regions working. It is estimated that these rainy day funds will be depleted by the end of 2017.
Social implications
The economic troubles of Russia are a grave danger for President Putin. The first years of his leadership he managed to strengthen the Russian economy and increase living conditions for the Russian population. These events were the basis for Putin to create an image as a powerful leader. Now, with the Russian economy in recession and declining living condition, Putin will face the prospect of losing popular support and possible protestations aimed against his regime.
Social unrest inside Russia is the last thing the Russian leaders wish to see and it should come as no surprise that internal security agencies have been strengthened in the past months. One new set of guidelines for FSB agents is the authorization to fire in the crowds. It is clear that Russia aims to smash any large protest aimed against the government. Up until now many protest have been small and non-threatening but we can only wonder how this will evolve once the economic troubles become more profound.
It remains therefor important for Russia to keep the attention of its citizens away from internal difficulties and have them more focused on Russia as a strong global actor. Russia’s military intervention in Syria helps to maintain the image that Russia is a powerful nation, leaded by a determent leader. Recent successes on the battlefield are good to raise moral but Russia will have to be careful to avoid mission creep and end up in a protracted stalemate where it cannot withdraw its forces without losing face.
Military implications
It is expected that Russia will continue to operate more actively abroad in order to draw attention away from its internal problems. The question will be to what extend will we see Russia becoming more involved. It is possible we see Russia increasing its operations in both Syria and Eastern Ukraine. Recent tensions with Turkey will also see Russia becoming more involved in the Caucasus where Armenia, backed by Russia, and Azerbaijan, backed by Turkey, are at odds over the Nagorno-Karabakh Region.
It is also expected that Russia will try to shift the blame for its economic troubles at the economic sanctions by the West. In this scenario Russia will increase its military stance against NATO and will more than likely step up its military exercises in its western military district.
Nevertheless are the coming two years paramount for Russia. Aside from keeping social unrest inside Russia under control there is the prospect that Russia will start losing much of its military power. Last year Russia started a major modernisation of its armed forces. When oil prices first fell the whole Russian government had to decrease its budget, except the Ministry of Defence. The latest reductions in the government budget saw a reduction in government spending by ten per cent, including the military. It is expected that with an ever more declining Russian government budget the whole modernisation effort of the Russian armed forces will be slowed down severely or even halted. This will increase the gap between Russia and NATO in Russia’s disadvantage. When the rainy day funds are depleted by 2017 the Russian government will no longer have the funds to pay for the modernization effort.
In conclusion we can state that Russia will face a difficult time under the current economic situation that will spark social unrest but will also diminish Russia’s military capabilities. It is estimated that by 2017 Russia will exhaust her so called rainy day funds, forcing the government to ever tighter budget cuts that will influence her military capabilities. Should Russia have any desire to intervene abroad or at its periphery then it is most likely that Russia will make such a move in the next two years while it still has the necessary military power.
