Read about how the war with Ukraine endangered Russia's territorial unity here .
The sanctions imposed on Russia because of the war have already hit a number of industries hard. We are witnessing serious crises in the oil and gas industry and metallurgy, so the regions directly related to them are the first to be hit. And, conversely, those regions that are connected with agricultural production, with work for the domestic market, with domestic tourism, may even be the beneficiaries of what is happening in the short term – unless these are regions adjacent to the theater of military operations.
If we talk about the typology or macro-regions that have suffered, then this is retail trade and everything connected with it – both large capitals and external relations. Kaliningrad suffers not only because Lithuania wants to close traffic, but also because it is oriented to the West – unlike Vladivostok, which, on the contrary, may even benefit from what is happening. Kaliningrad is becoming a hostage to a sharp reduction in foreign trade.
Regions directly related to the oil and gas industry and metallurgy are the first to be hit
Another important aspect is oil and gas and hydrocarbons, this is coal and Kuzbass, which today is under a strong blow and is sharply reducing supplies to the West, but cannot compensate for this with the East, because the Trans-Siberian Railway does not allow increasing trade flows towards Asia, even if consumers could be found quickly.
Gas is one of the subjects of the war and the lever with which the Kremlin is trying, on the one hand, to influence the West, and on the other, it seeks to drastically reduce purchases. But this strategic course is not yet as strong as the Kremlin's game of cutting gas supplies to the West. However, this is a serious blow to those regions of western Siberia that could previously benefit from the ever-increasing flow of prices for Russian hydrocarbons and gas.
Metallurgy, especially the ferrous metallurgy of the northwest, is in crisis all over the world, but in our situation this is aggravated by serious sanctions. Mechanical engineering, which could also be afloat for some time, because there were stocks of components, is also in a deplorable state today. Our automotive industry has ended, and those enterprises that were located in the Kaluga, in the Leningrad region, in Samara, in Togliatti, they are bent. All that is declared as a transition to other models, of course, can in no way compensate for the losses that Russia has already suffered. There are entire sectors that have sunk heavily and irrevocably – for example, the aviation industry, and nothing can be done about it.
There are entire sectors that have sunk strongly and irrevocably – and nothing can be done about it
There are also anti-sanctions and changes that are not directly related to sanctions. In fact, the end of the draft agreement on the division of Sakhalin products dealt a serious blow to the financial sector. Sakhalin was relatively recently bent over, reduced the share of income that the regions received, and redistributed them in favor of other Far Eastern regions.
When it comes to regions, this is a broad strokes picture – there are a huge number of settlements and cities, such as Togliatti, which are single-industry towns and are highly dependent on one specific production. It is absolutely impossible to replace this kind of backbone on which a large city rests in a short time. We will face the fact that businesses will close.
The Kremlin's reaction to the crisis is expressed in the maximum pressure on business, both private and public, in order to avoid radical manifestations of this crisis and social explosions. To do this, wages and working days are reduced, but formally people are at their jobs, they are not registered as unemployed. This is such an ostrich reaction – to stick your head in the sand, to agree that the statistics that are given be as convenient and favorable for the authorities as possible. However, this tactic could work if one had to wait a short time. No easing of sanctions is foreseen now, but tightening is quite possible.
The Kremlin has an ostrich reaction – to stick your head in the sand, to agree that the statistics that are given be as convenient and favorable for the authorities as possible.
The main problem is that the government is debottlenecking to prevent the situation from sliding down today, but the government does not have any strategic plan to keep the economy in the face of a huge and long systemic crisis. Those wonderful unemployment figures that the president constantly talks about do not reflect the severity of the consequences that we will see firsthand in the fall. So far, the crisis has been postponed, but it is accumulating and will be landslide.
Depressed regions that lived and live on subsidies from the federal center suffer less. According to official statistics, such regions, receiving huge subventions from the federal center, look very good, but they were given instructions on what to spend this money on. This is not a budget that you can manage as you wish. The question is whether the center will have the resources to maintain the level of support, for example, for Chechnya, in the same volume as before. We have seen that financial support from the center was largely determined by geopolitical considerations. Will it be possible, relatively speaking, to subsidize the ethnic North Caucasus to the extent that it will maintain control over the regional elites? This is a big question.
The political and economic model that underlay the entire Putin political regime is changing, and the restructuring of this regime is inevitable, including in terms of relations between Moscow and the regions. The role of gingerbread will inevitably be reduced, while the role of the whip must increase. Whether it will work out is a big question, because the whip is also money, but in the form of investments in security and law enforcement structures, on which you will also have to save some money.
The political and economic model that underlay the entire Putin political regime is changing
In my opinion, the sanctions currently imposed on Russia are such that it is unrealistic to live with them for a long time. It is impossible to say that in a couple of years it will be possible to adapt to these sanctions. This is not just about quantitative losses, including a decline in living standards, but about colossal qualitative changes. What the government or the Central Bank calls "restructuring the economy" is archaization, primitivization and demodernization. When we talk about sanctions, we must understand that this is not just a closure for the Russian economy of the West and Europe as the main market for many raw materials, but also a closure of Russia as a consumer of technology, as a consumer of those products, without which no economic development is possible.
Why are we talking today about the inevitable primitivization of the Russian economy? Take, for example, the automotive industry: when environmental requirements are first removed, then technological requirements associated with airbags, power steering, and so on, we return to the level of technology of the 70s. This cannot be done; today we have neither the time nor the resources, including skilled labor, to restore production to the way it was during the Soviet Union, when the country was autarkic and self-sufficient. Aircraft construction is a very good indicator. This is the industry that demonstrates that we have lost everything that we had in Soviet times in terms of production, and now we are losing Western aircraft, and we are not able to compensate for these losses with our production.
Because of the sanctions, we are returning to the level of technology of the 70s
It is important to understand one thing – it will not be better anywhere. Somewhere it will be worse to a greater extent, and somewhere less. Due to such a personnel policy that has been implemented over the past few years, regional leaders and their teams in most cases are purely external managers who, not only because of financial constraints, are not capable of independence and initiative, but who were selected in order to clearly and disciplinedly follow instructions from the federal center. The latter is categorically unwilling and unable, probably, to give the initiative to the regions both personnel and conceptually. The option when some regions will, at their own peril and risk, adapt to a changing situation better than others, is practically excluded. The variant of equalization will work according to the most depressive, the slowest-moving and dependent on money that comes from the center, and their volume will inevitably decrease – both because export deliveries will bring less money, and because losses will not be compensated for by the military industrial complex, but at the expense of everything else.
There is no hope that with Putin's departure the situation will change radically, and there cannot be.
What happened is not just the collapse of the life projects of a huge number of people. This is a lesson for a huge number of those who understand that it is irrational in our conditions to rely on independent projects that should give results in 3-5-10 years. The point is not that we do not have people capable of implementing such projects, but that in a situation of uncertainty, instability and a demonstrative lack of strategy, there is no future for undertakings.
When and how will things get better? Never, it seems to me. At first everything will collapse, and then long and dreary, step by step, something will begin to be built on these ruins. There is no and cannot be any hope that the situation will change radically with Putin's departure. The only question is how long this agony will last, which is not so obvious on the surface, but which means moving to a dead end. Initial predictions that in 2-3 months everything will start to fail and people will feel it have not materialized, and Putin is proud to say that our performance is better than that of a number of countries on the other side. I think it's a lot of self-deception, because it's not there. Another thing is that the safety margin of the system is quite large, so it seems to me that we need to think not for months, but for years. I do not see the possibility of maintaining stability without radical changes in the horizon of 3-4 years.
Tyva, Buryatia, Kalmykia, Dagestan, North Ossetia and Ingushetia – all these national republics belong to Fourth Russia according to the typology of Natalia Zubarevich. These are national republics, and their behavior does not fit into the general patterns that work in most other Russian regions. They were ruled by ethnic elites for many years, but now the situation is changing or has already changed, as in Dagestan, where Moscow replaces the local root elite with a newcomer without much effect.
Subsidized regions in dynamics will feel better than industrial ones
As for their response to sanctions and the crisis, oddly enough, they may feel better dynamically, that is, experience less negative effects of sanctions, than many other more developed regions than capitals and large industrial regions, only because they are largely subsidized. This is a purely public sector. Although it is clear that eventually the negative effect will sooner or later affect the financial and economic support that these republics receive from the federal center.
For many years, my colleagues and I have compiled a rating of the socio-economic and political well-being of regions from 2015 to 2020 on a number of indicators – economic statistics, political dynamics, and protests. In the socio-economic aspect, we assessed two categories of risks: short-term risks associated with the dynamics of household incomes, regional budget revenues and production dynamics; and medium-term risks associated with the dynamics of trade turnover, budget debt and investment dynamics, that is, what can lead to growing tensions in the short term and what can also lead to this in the medium term. At the same time, we assessed the socio-economic situation both from the point of view of households – income and trade turnover, and from the point of view of regions and regional budgets.
In the North Caucasus, the risks of the household economy have always been high, and at the same time, Dagestan has always been among the high-risk regions during all the years of measurement, because there political risks were combined with an active protest movement.
If we look at the Russian regions in terms of wages, say, last year, we will see that Kalmykia, Dagestan, Ingushetia and North Ossetia are at the very bottom of this ranking, while Kalmykia is the poorest region in terms of wages . There, 20% of the population has salaries below 15 thousand rubles a month. Next comes Dagestan, which has about the same indicators as Ingushetia and Kalmykia. Things are a little better in North Ossetia, even better in Tuva and Buryatia, but it depends on what indicators we look at – in terms of absolute wages, Tuva and Buryatia look much more decent than the regions of the North Caucasus. However, the problem is that these are regions with northern allowances, and the consumer basket there is much more expensive, so when economists look at the ratio of income to the cost of a basket of goods and services, and the share of the population below the poverty line, then Tuva is the absolute champion, and Kalmykia and Ingushetia is very close to her gone. At the same time, Tuva is the only region where the ratio of income to the cost of the basket is less than one, that is, the average level of income is not enough to provide a minimum set of goods and services. One third of the population lives below the poverty line. In North Ossetia and Dagestan, the situation is slightly better, but they are all below the Russian average.
The figures given by Rosstat are very inaccurate, especially for the North Caucasus
For the national republics, it is clearly seen that the figures for economic statistics are very inaccurate, especially for the figures for the North Caucasus. Yes, there is a large stratification there, the standard of living is generally very low, but these regions did not prosper even before the crisis and before the sanctions. For them, the blow of the crisis is now less noticeable and distinguishable than for regions such as Tatarstan, which were among the leaders, and today they are losing a lot due to sanctions and consequences.
All the regions we are talking about are regions subsidized by the federal center, and in this capacity they feel today almost the same as they did yesterday or the day before yesterday. Their losses will be associated with the deterioration of the socio-economic situation in the country as a whole, with budget cuts, primarily for subsidies to the regions and for assistance to regional budgets, although the North Caucasus has been and remains one of the very important priorities for the Kremlin.
It will be difficult to maintain a balance, any shifts in the interests of different ethnic clans will be a destabilizing factor
It is important to understand that we are talking about small regions, and the population is largely rural, not urban, which means that there is some level of stability there due to the fact that people are much less dependent on the work of industrial enterprises and the money that for this Citizens can get jobs, and in many respects from themselves and their plots. Although these national regions belong to the Fourth Russia, typologically they are adjacent to the Third, which is the rural hinterland, dependent on pensions, which in turn will be indexed further, but there is no dependence on the income of industrial enterprises, neither on the efficiency of their work, nor on the very fact of the work of large industrial enterprises. In each of these republics, even the smallest Ingushetia, there are different clans whose interests are somehow balanced. In Dagestan, for example, representatives of large ethnic groups control the main areas of the economy, and as soon as the balance begins to change, this will directly affect the interests of ethnic clans, and through them, ethnic groups, and in the situation of Dagestan, where ethnic groups are densely settled, this acquires a territorial dimension. and could cause a social explosion similar to what we have seen in Dagestan in the past. It will be very difficult to maintain a balance, and any friction and change in balance, any shift in the interests of different ethnic clans will be a destabilizing factor in one way or another.
It is Moscow that provokes conflicts leading to the split of the country
As for the situation with the split of the Russian Federation, this is not a one-time event, it is a chain of actions and their consequences. The main problem, I think, should not be seen in the fact that some ethnic clans want to secede from Russia. The problem is that in the conditions of over-centralization, it is Moscow that can provoke those conflicts that will ultimately lead to the prospect of a split in the country. Но не потому, что кто-то сегодня хочет и способен выдвигать лозунги отделения от России, а потому, что Кремль, пытаясь управлять централизованно сменяющейся ситуацией, распределять деньги и сохранять баланс интересов этнических групп или же игнорировать этот баланс, будет вести к дестабилизации. Дальше уже возникает цепочка — нарушаются интересы этнических кланов, это может привести к серьезным протестам по самым разным поводам, а если реакция на эти протесты недостаточно взвешенная и выверенная, то она может вести к усилению, а не ослаблению конфликта. К сожалению, Кремль не может реагировать быстро и точно, потому что из Москвы ситуация видна гораздо менее содержательно, чем изнутри региона.