Border Line

Riddle Of Putin’s Russia

 

putin-AP-CHANGED
Bidding Europe adieu? Source: AP

 

The German economy is watching developments in Russia with anxiety – and it has little to do with Western sanctions. A bigger issue is the Russian government’s decision not to push for modernizing the country’s industry and establishing economic ties with the European Union.

Russia no longer seems interested in setting up an economic order with division of labor. Since the peak year of 2012, trade with Germany has decreased dramatically. By 2013, Russian imports declined in almost all sectors, in some cases by more than 15 percent.

Russian companies face a multitude of worries beyond today’s sanctions: The ruble’s loss in value. An unacceptable low rate of growth. The massive flight of capital. Insufficient investment. Lack of progress in productivity. A swollen public sector. No spending on infrastructure. And more and more, Russia is losing its most qualified young people through emigration. In a country that already has massive demographic problems, this is perhaps the most disturbing problem of all.

Russia’s government, however, issues slogans of perseverance and proclaims industrial self-sufficiency. It has apparently forgotten the words of Vladislav Surkov, advisor to President Vladimir Putin, who in 2011 said the highest patriotism would be to recognize Russia cannot go it alone. Mr. Putin’s regime also seems to have forgotten the euphoria over his nation’s admission to the World Trade Organization in 2012.

Now the German economy must ask itself whose interests it actually intends to serve.

Now government programs are supposed to set things straight everywhere – and the old planned economy is staggering through the land like a zombie. Russia’s vertical power structure and energy revenues can maintain this system without a future for many years to come. All that is needed are continued high gas prices and keeping Ukraine as its most important client.

For that reason alone, shouldn’t Russia allow the revolution in neighboring Ukraine to succeed? The fact is that it is not directed against economic ties with Russia: 45 million Europeans simply made a choice for European rule of law, for a European-style work-sharing economy and society.

 

German companies in Russia

 

Europe is trying to protect the path that was freely chosen by the Ukrainians – and sanctions have hit the Russian financial sector and economy hard, especially shutting down the flow of much-needed financial loans and capital.

Now the German economy must ask itself whose interests it actually intends to serve. It is true that German companies have earned much money in recent years, but most firms don’t fundamentally depend on those revenues. The Russian market is important above all because of its massive potential for future development, not because of the short-term profits it offers.

At the moment, Germany’s business leaders can only hope that Russia again learns to value the great advantages offered by economic partnership. Russia’s leaders must provide its partners with arguments that it actually desires modernization and integration with a community of nations – and that it will respect the rules of the game that go with it.

 

Marcus Felsner is chairman of the Association of German Industry for Eastern Europe (Osteuropaverein der deutschen Wirtschaft). He can be contacted at gastautor@handelsblatt.com

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