Russia’s economy is not performing badly. Thanks to the high oil price, economic growth is likely to stay at 4 per cent or a little less for the next few years – respectable by West European standards. The problem is that Russia’s rulers do not appear to have a plan for modernising the economy, which is alarmingly unbalanced. Oil and gas provide half the government’s revenue and almost 70 per cent of export earnings. Output of oil and gas is flat and few new fields are coming on stream. Even if the oil price stays high, Russia is heading for current account and budget deficits in the years ahead.
But Vladimir Putin, now in his third term as president, seems unconcerned. I recently attended the Valdai Club, a group of Russian and foreign think-tankers, academics and journalists that meets Putin and other Russian leaders once a year. Compared with six or seven years ago, when I first attended these meetings, Putin’s attitude has evolved. He has become increasingly relaxed, to the point of complacency. He displays little sense of urgency about tackling the challenges facing Russia.
