Vladislav Inozemtsev explains how Russia under Putin’s first term of office thrived economically. Until the global financial crisis in 2008, Russia was one of the world’s fastest growing economies. The factors that contributed to this phenomenal growth are history. Under current circumstances this success will not repeat itself. The economy is “at a standstill” since Western sanctions imposed following the 2014 annexation of Crimea. Its prospects look grim, and the reason why it will hardly improve “substantially” anytime soon is Putin’s “indifference.”

The author points out that Russia’s rapid growth at the beginning of this century was not exclusively the result of a high oil prices as the West assumes. Three other crucial factors also played a role: “First, the liberal economic and tax reforms of 2000-2002 encouraged entrepreneurs to invest and consumers to earn and spend. Second, foreign capital flooded the Russian economy, and even created several new sectors. Third, industries that had been non-existent or underdeveloped in the 1990s began to contribute substantially to GDP growth.”

The robust economy improved the living standard of the average Russian citizen and also brought economic stability that Russia had not seen in at least a decade. This strong performance had boosted Putin’s popularity, and allowed him to be bold and reassert Russia’s status as a world power in the Soviet era, challenging the US, Europe, the neighbouring former satellite states in economic and national security areas.

The 2008 financial crisis had taken a toll on Russia’s economy, and the collapse of world prices for oil and other commodities exposed the downside of Russia’s reliance on the export of oil, gas, and other natural resources. Its failure to forge important economic reforms, the Kremlin’s penchant for re-asserting its control over key economic sectors, and Putin's often arbitrary rule had substantially eroded the trust in Russia’s judiciary. In the absence of the rule of law, domestic and foreign investors stay away.

In his first two terms in office, from 2000 to 2008, Putin made the re-establishment of a strong state his priority. He disempowered disloyal regional governors, crushed the oligarchs who did not stay out of politics, and led a brutal war to obliterate separatism in Chechnya. He took complete control of the main television channels and neutered any opposition political parties, seeking to restore Russia’s former glory – a fusion of the Russian Empire and the Soviet Union.

Although Russia’s influence has been greatly diminished since the fall of the Soviet Union, it remains a formidable force on the global stage thanks to Putin. And he is seeking to expand his country’s influence across the globe – from Africa to Latin America. Russia is a significant player on a number of issues critical to the US – nuclear proliferation by Iran and North Korea. Russia’s national interests do not always match those of the US, and its meddling in the 2016 election had alienated many Americans.

It has become increasingly clear that Putin lacks a longterm perspective for his country, seeking to hang onto power as long as he can. It remains unclear whether he contemplates stepping down in 2024, or he seeks a third consecutive term after a constitutional amendment. As he rests assured that nobody would be able to govern after him, he sees no urgency for economic reforms that would wean Russia off its reliance on fossil fuels and create a friendly environment for investors.