One of the main Russian propaganda narratives claims that Russia has a large and powerful economy capable of withstanding any pressure from the West. An underlying theme is also the assertion that Russian products are superior to those of the West. How did this narrative originate?
Russia’s vast resources have been a source of pride for its people and a subject of awe for foreigners for centuries. A comparative tilt emerged after the October Revolution, as capitalism and socialism, according to Marxist theory, offered two distinct societal models to compare. This led to the developing of an economic science branch known as comparative economics.
After the fall of the Soviet Union, Russians initially showed little interest in comparing themselves to others. However, in the early 2010s, as oil prices rose, the Russian economy gained traction. This provided an opportunity for at least part of Russia to compare itself positively to the West.
The narrative gained particular momentum in 2014 when sanctions were imposed on Russia following the annexation of Crimea. The government had to assure citizens that there was no need to worry, and if foreign goods disappeared from store shelves, they needed to justify it. The solution is to proclaim that our products are better.
What does this narrative tell us?
It tells us that Russia’s economy is large and powerful, enabling the country to assert itself globally. Even if Western countries claim to boycott Russian goods, they supposedly cannot do without them. Russia, on the other hand, can manage without the West.
Russia doesn’t rely on French or Italian cheese; it can craft its own equivalents. It doesn’t depend on Coca-Cola; it formulates its soft drinks. It doesn’t require Western cars; it produces its own vehicles, as exemplified by a recently unveiled electric car prototype comparable to Tesla. In the face of a shortage of planes or foreign-made spare parts, Russia is ambitiously planning to manufacture over a thousand civilian aircraft by 2030. Russia takes pride in its robust arms industry, providing a formidable military with cutting-edge technology.
Who is the target audience?
On one hand, it is directed towards domestic consumption, injecting an additional dose of patriotism into Russians during challenging times. If things are tough, at least let’s show the rest of the world.
On the other hand, it is aimed at external audiences. It serves to boast to friends about having a powerful ally. It also aims to undermine the morale of adversaries, suggesting they have no hope of prevailing in the end.
What are its goals?
At various times, observers noted that Russians are willing to sacrifice personal well-being if they can live in a powerful state. The former Finnish president Mauno Koivisto wrote in his book “The Russian Idea” (2001): “Welfare or happiness has never been the goal of Russian or Soviet aspirations. The goal has always been—even at the cost of great suffering—the realization of greater objectives.”
While Putin once played the role of promoting consumerism to buy loyalty, now, in times of war, sacrifices are necessary. If the government can create the impression that the country’s glory is growing as a result, the sacrifices seem justified. If nothing else, this narrative is useful for marketing import substitution campaigns. Our things are indeed the best, and we don’t need Western ones.
For foreigners, the goal is to make them believe that they cannot succeed against Russia. Their sanctions don’t work because Russia is so strong. The aim is to make opponents believe it’s better to make a deal with Russia and that Russia is generous if they agree.
This also aligns with Russia’s tendency to enhance its external image. The desire to impress foreigners has a long tradition in Russia, as noted by Astolphe de Custine in his book “Letters from Russia” (1843).
Indeed, Russia’s economy tends to be underestimated. Some analysts have even claimed in recent years that Russia’s GDP is comparable to Belgium’s. While this has never held, the comparison of Russia’s economy in the 1990s during a low oil price period was roughly the size of the Netherlands—about 70% larger than Belgium. This comparison is no longer accurate, given the significant increase in oil prices and, consequently, Russia’s GDP since then.
Currently, Russia’s economy ranks in the top ten globally, according to various assessments. The International Monetary Fund (IMF) places it eleventh in 2023, between Canada and Mexico. The World Bank even positioned Russia eighth as of 2022, ahead of Canada, Brazil, and even Italy.
However, in terms of per capita purchasing power parity, Russia’s GDP ranks 67th globally in 2023, according to the IMF. Yet, as mentioned, Russia has seldom been concerned about living standards.
How is Russia faring now?
Due to information restrictions, a definitive assessment is challenging. The Russian statistics office has stopped publishing some indicators, and there are doubts about the accuracy of the remaining ones. International analysts find it difficult to verify these data since many have left Russia.
Some observers believe that Russia is managing well. The country has shifted to a war economy, where the production of military equipment constitutes a significant and growing portion of GDP at the expense of consumer goods and other sectors. Some analysts even believe that Russia can produce more military goods than the West. Economic studies and Russia’s foreign trade data, however, suggest that sanctions, at least to some extent, are still effective, although there is room for their enhancement.
Next year’s Russian state budget indicates that the country is preparing for a protracted war, allocating a record 6% of GDP for military spending, surpassing the allocation for social expenditures, although the latter is also increasing. This has turned war into the primary engine driving Russia’s economic growth.
One should not overestimate Russia’s capabilities. Resources and labour are already scarce, and inflation is causing issues. The annual inflation rate rose to 7.5% in November, according to official data. While not particularly unusual in Russia’s recent decades, the situation is expected to become even more complicated.
Data indicates that while the price ceiling imposed on Russian oil doesn’t work particularly well, the country’s oil revenue, according to central bank data, fell by 41% in the first nine months of 2023 compared to the same period a year earlier. The primary factor behind this decline is the impact of Western countries’ oil embargo.
This year’s state budget is running a considerable deficit, reaching, according to plans, 2% of GDP. According to next year’s state budget, the deficit is expected to decrease to 0.8% of GDP, but these calculations depend significantly on the price of oil. So far, Russia has covered deficits from reserves, which, according to various estimates, are projected to be depleted sometime in 2024.
If there are no more reserves for spending, the options are either to cut expenditures or find additional funds. The largest portion of the budget goes to military and social expenditures. Likely, military spending cannot be reduced, especially during an ongoing war. Trimming social expenditures, however, would pose a risk of societal problems.
Closing the budget gap is possible through borrowing, but Russia currently lacks access to the international capital market. Therefore, domestic lenders remain the only option, and they can be coerced if necessary. Another option would be to print more money, but this carries a significant risk of inflation. Since Russia is already experiencing rising prices due to import shortages and unemployment is only around 3%, increasing the money supply could be a slippery slope.
Additionally, the Russian defense industry is plagued by inefficiencies and substantial losses. Consequently, a significant portion of the increased military spending this year goes towards covering these costs. The situation is likely to be the same next year because the country’s defense industry relies on imports. However, there are ongoing issues with imports, regardless of claims denying the effectiveness of sanctions. On one hand, the Russian ruble has depreciated and is likely to weaken further. On the other hand, due to sanctions, some necessary foreign components for weapons manufacturing are unavailable, and replacing them is costly. All these factors contribute to the rising cost of military equipment.
Taking all these aspects into account, a substantial drop in oil prices would be sufficient to necessitate comprehensive cuts to Russia’s ambitions. Miracles occasionally happen.
The used images are screenshots from the referenced pages. The infographic was created by the editorial team of Propastop.
