Home International The Fate of the Russian Economy Looms Large Over Europe

The Fate of the Russian Economy Looms Large Over Europe

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Russian Economy Falls

2015 proved to be one of the most challenging years for the Russian economy in recent history. Russia’s misadventures into Ukraine and the Crimean peninsula cost her dearly in terms of international prestige, political credibility and economic clout. Recently, a report written by Sir Graham Watson, Leader of the Liberals and Democrats for Europe, featured an exposé on the state of the Russian economy and Russian business practices in particular. In January 2016, the Litvinenko Inquiry concluded with its Chairman, Sir Robert Owen, presenting his verdict on the matter. According to the findings of the inquiry, Russia exhibited behaviour akin to that of a terror state. Interestingly enough, when this information was made public, the Deputy Prime Minister of Russia, Yury Trutnev, alluded to the need to implement a series of structural reforms in the country to stabilise the economy and prevent the out and out collapse of its financial structures. Flanking the Deputy Prime Minister was a former Finance Minister in the form of Alexei Kudrin.

Why Is Russia’s Economy Tanking?

The Russian economy is being crushed from every angle, including biting sanctions from Europe and the US over its expansionary policies in the Crimean peninsula and its involvement in the domestic affairs of the Ukraine, as well as the impact of historically low crude oil prices, and other commodity prices. Since Russia’s economy is largely based on crude oil (80%), it has seen a virtual collapse of its financial sector with massive capital flight, rapid depletion of currency reserves, and a widespread loss of conference from domestic and foreign investors. The Russian Deputy Prime Minister has been calling for structural reforms to arrest the declines in the Russian economy. Among the many concerns are the horrific methods used by police and investigators to attack Russian companies; measures so abrupt and hostile that they are causing tremendous harm to the economic well-being of Russia. As a case in point, the Russian economy is contracting at a rate of 3% for 2016 alone. More worrying is the fact that the Russian economy will be smaller in 2017 than it was in 2012.

Malfeasance, Corporate Raiding and Widespread Corruption

Corporate Raiding in Russia
“Many instances of government corruption, overreach and virtual extortion are taking place on an all too familiar basis in Russia”

The cracks run deep in the Russian economy, and the business sector hardly has much reason to celebrate nowadays. Multiple instances of Russia being labelled a terrorist state have made it onto the front pages of newspapers worldwide. There is credence in this, given that Moscow is taking an increasingly heavy hand against economic and political opponents at every juncture.

One of the architects of Russian mafia-style corporate raiding is Dmitry Mazepin, and his witchhunt against chemicals industry giant TogliattiAzot as well as its Chairman Sergei Makhlai. Since 2005, the company and its figurehead have been subjected to an incessant corporate raiding campaign, led by Mazepin’s Uralchem: a minority shareholder In Togliattiazot, which is attempting to buy the company and potentially gain control over 20% of global ammonia production. Unfortunately, that is not an isolated story: there has been widespread corporate raiding taking place in Russia, with firms like Smarts and Hermitage Capital also subjected to attacks.

Many instances of government corruption, overreach and virtual extortion are taking place on an all too familiar basis in Russia, and there is indeed an atmosphere of institutionalized corruption. That the Russian government is now exporting its territory and tickles all over the world, including the European Union, is worrying. For example, employment is in plunging in Russia, with real wages plummeting 9.2% year-on-year. Inflation is out of hand, and interest rates are high – the perfect recipe for a protracted period of destabilization in Russia and all the countries that it deals with.

How Can the Russia Story Work to Europe’s Advantage?

European leaders such as Sir Graham Watson and company are continuing to shine the spotlight on the activities of the Russian government. By doing so, awareness is being raised and pressure is being applied in the right circles. It is imperative to stress the growth and development of private enterprise in Russia, so that fewer government-controlled entities exist and more are driven by the free-market system where transparency, credibility and market dynamics are central to the operations and success of the enterprise. To counter mafia-style operations, the Russian government must put in place a framework that protects corporations and the free-market system. Companies will simply have no appetite to invest in Russia if they run the risk of takeovers and corporate raids.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

 
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William R. Feins , freelance journalist from London, UK; he received his B.A. degree in Economics and his Masters in Sociology. William has always been interested in the mechanics of business and the inspiration of original thinkers, and firmly believes that the former can’t succeed without the latter. In his spare time, he enjoys the ridiculous spectacle of watching table tennis on a big screen (preferably at a pub) and reading weighty tomes about World War II.

31 COMMENTS

  1. It is unfortunate but Russia isn’t the only one struggling; many European countries are. I wonder what the future of Europe is.

     
  2. As the International Monetary Fund noted last summer, Russia already entered 2014 with declining potential growth owing to the stabilization of oil prices, stalled structural reforms, weak investment, declining total factor productivity and adverse population dynamics. In addition, the ongoing slowdown was exacerbated by the dual external shocks from the sharp decline in oil prices and sanctions.

     
  3. If Russia goes down on economy, i think it cold effect the whole would. However, I think that the US, China, and Russia should all join allies together and form a big alliance to make businesses grow. If all of europle can align together with US, it would be a better world.

     
  4. These restrictions on Russia are not helping nearby European countries due to Russia’s control of the gas supplies. Alignment with Russia needs to be reestablished as it will benefit the EU wholly.

     
  5. It’s interesting to read about what people do and the fact that we have no power over it. It’s just entertainment at this point. Yes, there is corruption and it impacts people. But, let’s just deal with it is the attitude to have.

     
  6. This is a very interesting article. I find it very interesting to know what is going on in other places and countries. I also find it scary because it could have a serious impact on the whole world.

     
  7. Very informative article. It’s a shame that Russia is in such dire circumstances. It’s even more tragic that the Russian government is using such mafia style tactics to impose it’s will on companies. History shows that less government control leads to more prosperity. If the Russian government wants to see it’s economy grow, they should get out of the way.

     
  8. There are many things that people have too think about here . Russia’s economy means a lot more than people think it does and if it does not get fixed i dont see anything goof coming out of that i mean all these countrys should bring themselves together and try to figure something out because of russia economy being the way it is many people are going too be effected by this and thats something that should not happen .

     
  9. This is a good article to bring more attention to the Russian economy. Every county should be more careful & do what they can to fix their economy as well as help each other

     
  10. It’s very difficult to work with a country where a large proportion of the economy is above or outside the rule of law. The article nails it in saying that only by building a thriving free-market economy can the mafia style economy be driven out.

     
  11. I hope they can stabilize the Russian economy. They need some good leaders. If it could build its financial sector back up with the help of it’s neighboring countries instead of all them blaming each other it could get back on track. They need to all work together. They could help each other. Also if they could get the bad government out and vote good in that would get rid of the corruption and they could start growing again. This article has a lot of eye opening information to let people know what’s going on. Very good information.

     
  12. I wonder who the major players Russia deals with in terms of countries for export and if changing this would help to improve matters.

     
  13. This is the type of thing that I think about when people talk about how great of a leader Putin is… I don’t think he has the touch that is needed in certain situations such as this….

     
  14. No country is exempt from the irreversible crisis of capitalism. it is a system in decay and it will continue to worsen with each crises.

     
  15. This is a good article to bring more attention to the Russian economy. Every county should be more careful & do what they can to fix their economy as well as help each other

     
  16. they can to fix their economy as well as help each other. i mean all these countrys should bring themselves together..

     
  17. Hopefully articles like this bring more attention to the Russian economy because it definitely needs fixing. Great article though!

     
  18. Government corruption and extortion must be stopped in any
    countries as it will make a country fall and the people in it will be
    affected. Thanks to this article as I’m
    being oriented about what’s going on with the economies and the governments of
    the mentioned nations.

     
  19. Fascinating read; I think at the end of the day the more open to free market forces Russia becomes, the better for everyone involved. Accountability and the rule of law are the best tools to combat corruption.

     
  20. The less there is of government corruption and greed, the more better off Russia will be as a whole. They cannot fight the inevitable forever, and should be a more open society.

     
  21. I really hope they can fix the Russian economy. They need better leaders. This article has a lot of good information that really brings to light what is going on somewhere other than The U.S.. Very good information.

     
  22. This is very significant article .I think that Russia plays an crucial role for the growth and development of the European country.Many instances of government corruption, overreach and virtual extortion
    are taking place on an all too familiar basis in Russia.Due to the such reason there is tanking in Russian economy.

     
  23. I genuinely hope Russia will fix their economy. However the government corruption and greed should be sorted in order for Russia to be better

     

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