Russia’s economy has endured a tumultuous year: falling oil prices, international sanctions and a declining ruble have pressed the Kremlin to answer questions about the long-term sustainability of its current growth model. What opportunities and challenges face the Russian economy in 2015? What are the Kremlin’s economic priorities and how will it craft policy to reach these ends in the coming year?

On January 28, 2015 CGI hosted a half-day conference featuring top Russian and American experts to discuss the outlook for Russia’s economic future. Their main points are summarized below.

Panel 1: Domestic Dynamics of the Economic Downturn


Sergey Aleksashenko, Private Solutions LLC; former Deputy Minister of Finance of Russia and former Deputy Governor, Russian Central Bank:

  • The Russian economy is built on corruption but it is much more stable than we tend to believe. In addition, what the West calls “corruption” in Russia is really racketeering – a developed system of payments to local authorities and public servants, to which businesses must contribute in order to exist.
  • China has no official sanctions against Russia, but Chinese banks are hesitant to lend to Moscow. This undermines the Kremlin’s attempt to replace lost Western financing with Chinese funds.
  • The most likely prognosis for the Russian economy is a long and steady decline, accompanied by state attempts at budget redistribution in place of reform. The Kremlin may also loosen some regulations on small- to medium-sized business, though it has no plans to bail them out.


Anders Aslund, Senior Fellow, Peterson Institute and Adjunct Professor, Georgetown University:

  • Sanctions had a much worse effect than anyone in or outside of Russia expected. However, sanctions are most effective when they are being threatened with or finished with.
  • Low oil prices mean 1/3 of Russia’s export revenue is gone, while imports are expected to fall by half under current conditions. The value of Gazprom, the most important company in Russia, has fallen 7-8 times since the start of the crisis.
  • Exclusion from the SWIFT banking system would seriously complicate all bank payments with Russia.


Maxim Trudolyubov, Fellow, Woodrow Wilson Center and Opinion Page Editor, Vedomosti Daily, Russia:

  • Before 2014, Russian companies had a tacit agreement with the Kremlin which encouraged business offshore and into western financial institutions. This arrangement discourages property rights protection and fails to create institutional capacity.
  • Russia’s plunging economy is presented as the price of pursuing a noble cause: standing up to a waning America, fighting “fascism” in Ukraine and winning recognition for Russia as a global power. This narrative is conducted without regard for small and medium-sized business activity.


Panel 2: International Ramifications of a Weakening Russia



Dieter Dettke, Adjunct Professor, Georgetown University; former U.S. Representative and Executive Director, Washington Office of the Friedrich Ebert Foundation:

  • Germany’s top priority is to secure a European consensus, so it can’t push too hard on lifting sanctions. Yet Germany values the reconciliation of the German and Russian people that began with ostpolitik and is hesitant to lose that relationship.
  • 6,000 German companies and 300,000 jobs depend on Russia, and large investments were planned before the current crisis. Germany expects to lose 1/3 of business with Russia, with 45-50% loss in the tech and engineering sectors — largely to the benefit of China.
  • A turn to China would severely limit Russia’s scope of action as a “great power.” Russia’s great-power status has always been linked to cooperation and a productive relationship with Europe.
  • The Eurasian Union brings less economic gain to Russia than the proposed free-trade area from Lisbon to Vladivostok. However, the Ukraine crisis makes the latter project impossible.


Edward Verona, Senior Advisor, McLarty Associates; former President, U.S.-Russia Business Council:

  • Prime Minister Dmitry Medvedev’s focus on the 4 i’s (innovation, investment, institutions, information) brought few results for the Russian economy.
  • ExxonMobil has a strategic agreement with Rosneft but suspended operations since sanctions. The West would get back to business with Russia very quickly if sanctions were lifted, but that won’t happen anytime soon.


Jill Dougherty, Public Policy Scholar, Kennan Institute; former Foreign Affairs Correspondent, CNN:

  • The current mood in Moscow is that of fear about the situation getting worse. Many Russians lost all savings during the crises of 1993 and 1998, and have a visceral response to economic scares.
  • Recent statements by Russian officials indicate the Kremlin is inoculating people ahead of hard times. The economic downturn has only reinforced peoples’ perception that Putin alone can take them out of the crisis.
  • The West can change Russians’ perceptions about democracy by stressing that it is a flawed system which strong institutions can serve to correct. Russia has strong personalities but weak institutions; it needs a greater emphasis on structure and process.