The Transition Project: Decentralization of the Economy

The centralized rule of the siloviki and the revival of an aggressive imperialist state under Putin would have been impossible without the prior consolidation of economic forces. Economic reforms will be an important component of the decentralization of power in Russia.

Since Vladimir Putin’s invasion of Ukraine in February 2022 the old model of business as usual (where Russia became increasingly authoritarian but continued to trade with the West and gain access to Western technology, services, commodity and capital markets) is no longer possible. Putin’s pivot to Asia works only to a limited extent: China and India are interested in Russia mainly as a supplier of cheap material resources and a buyer of consumer goods, but not as a potential global competitor in manufacturing. Asian countries are unable and/or unwilling to act as a donor of capital, skills and technology to Russia, as the West has been since the 1990s. Trade with Asia is also less profitable because of rising logistics costs: most of Russia’s economic activity is concentrated in the European part of the country, so that there is lower economic gravity and rationale for trade.

Normalization of relations with the West remains the only option for returning Russia to normal economic development. In the event of Putin’s departure, Russian society and the Russian elite are likely to demand normalization of relations with the democratic world, which could be used to influence fundamental shifts in Russian politics and the very foundations of the Russian state that require democratization, institutional checks and balances, payment of war reparations to Ukraine, and prosecution of war criminals.

It is quite possible that Putin’s immediate successors will have no interest in either democratization or negotiations with Ukraine and the West. Unlike Germany in 1945, Russia, being a nuclear power, is unlikely to be occupied. But any post-Putin government will have to reckon with very strong economic leverage in the hands of the West and will be interested in the support of its citizens. The easiest way to get that support is to shift the blame for all previous problems onto Putin and offer Russians a program of economic development. In turn, the most obvious first step of any economic development plan is the lifting of sanctions.

We continue to publish chapters of The Transition Project, a step-by-step expert guide to democratic transformations in Russia after the change of power.

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