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Russian Money Woes May Force Further Overseas Adventures

Kudrin says Russia must settle political differences with West for economic growthFormer Russian economic minister Alexei Kudrin, once Vladimir Putin’s golden boy, said today that the Russian government has not faced economic realities regarding the economy and the federal budget.

“The price of oil fell, we don’t have enough income, and there are problems with growth factors,” Mr. Kudrin told his audience at the Center for Strategic Research on Monday. “We learned to easily manage money when there was an abundance of it; what I want to say now is that neither the country’s leadership nor the ministries understand that we have moved into a new reality,” reports The Moscow Times.

Many analysts believe the Kremlin’s adventures in East Ukraine and Syria can largely be traced back to the collapse of the price of crude oil on international markets. Combined with Western sanctions imposed after the annexation of the Crimean Peninsula, the low price of hydrocarbons has severely impacted the ability of the Russian government to fund needed projects in the face of increased military spending. To keep the public’s eyes off the domestic economic crisis, Moscow has chosen offshore military adventures to rally the patriotic spirit of the Russian population.

During the heyday of high prices for crude oil, Russia failed to diversify its economy away from the sale of natural resources. In fact, today the Russian economy is more dependent on oil revenue than during the days of the Soviet Union. Spending on social services has been cut while expenditures for armaments and overseas military operations continues to climb. At some point, economic reality may collide with the Kremlin’s desire to restore Russia’s greatness on the international stage. That will be a dangerous time indeed.

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