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Where Will Russia's Economy Be in 5 Year's Time?

The outlook for Russia’s economy at this year’s St. Petersburg International Economic Forum is very different very different than one year ago.

Published: May 23, 2014 (Issue # 1812)


Last May, Russia's economic growth far outshone that of both Europe and the U.S., which were then only beginning to emerge from a long period of stagnation. The economic integration of Russia and the West also seemed unstoppable. Now, in 2014, Russia stands on the brink of recession and the fallout from its clash with the West over the crisis unfolding in Ukraine risks demolishing more than two decades of economic bridge-building. Caught between the slump and the West’s cold shoulder, Russian officials have begun making noises about looking to fast-growing Asian economies for new partners and sources of growth.

In the run-up to the forum, The St. Petersburg Times asked three business leaders from different industries to look through the mists and predict how they think the Russian economy would fare over the next five years.

Philip Halperin

Independent director and financial risk advisor, former chief risk officer at Alfa Bank and advisor to the executive board at Gazprombank.

1. What will be the main driver of the Russian economy over the next five years?

Using the word “driver” to mean “major determinant,” rather than “primary boom,” the main driver of the Russian economy — aside from oil, gas and armaments — is concentration and lack of competition. What Russia has is not a capitalist system, but crony capitalism. Insiders are insulated from the slings and arrows of fortune, and margins are protected. We see, for example, insider agreements to get rid of food and electronics markets that undercut the prices offered by favored retailers, and the removal of exchange points in favor of banks. Competition is arranged away, and the consumer is not king. This has led to a sort of new “zastoi,” or stagnation, reminiscent of the Brezhnev years of the Soviet Union.

This fact has become part of the second driver, or major determinant, of the Russian economy — disillusionment.

Business owners and managers milk profits rather than re-invest them, and the promise of the economy is becoming more a “was” than a “will be.”

2. Where do you see Russia-Western economic cooperation in five years?

Russia is a seller of raw materials — which in five years will still be consumed by Western nations, each according to its perception of its own interests — and as a consumer of finished products. In other words, Russia is a sort of a colony of the West. This is an old pattern, dating back to the days of Veliky Novgorod and the Hanseatic League — Novgorod exported lumber and amber, and brought the products of Western mills. The major advanced products of Russia — armaments and space technology — will be not purchased by the West for political reasons.

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ALL ABOUT TOWN

Tuesday, Oct. 21


The Environment, Health and Safety Committee of AmCham convenes this morning at 9 a.m. in the organization’s office.


Take the opportunity to pick the brains of Dmitry V. Krivenok, the deputy director of the Economic Development Agency of the Leningrad region, and Mikhail D. Sergeev, the head of the Investment Projects Department, during the meeting with them this morning hosted by SPIBA. RSVP for the event by emailing office@spiba.ru before Oct. 17 if you wish to attend.


Improve your English at Interactive English, the British Book Center’s series of lessons on vocabulary and grammar in an informal atmosphere. Starting at 6 p.m., each month draws attention to different topics in English, with the topic for this month’s lessons being “visual arts.”



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