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Can Russia Save Itself From The Crisis?

Forecast

  • The Kremlin will allow the economies of many of the country's Soviet-era mono-cities to deteriorate.
  • Protests against the Kremlin will increase as more Russians fall under the poverty line and regional and municipal debt grows.
  • The Kremlin will crack down on protest movements and opposition parties to block the formation of any serious challenge to its hold on power.

Russia's economy is in steep decline, and the financial strain on the Kremlin is beginning to spread to the country's regions, cities and people. Many of Russia's regions are already on the verge of default. As the pressure continues to build at the regional level, the country's municipal governments and citizens will find themselves increasingly strapped for cash.

With little hope of economic recovery in the near future, the Kremlin is taking steps to quash any threat of regional defiance or mass protests against its leadership. As its attention shifts inward over the next few years, the Kremlin's capacity to assert itself abroad will diminish.

Russia's Mono-Cities Are Struggling

Russia's mono-cities, or single-industry towns, are beginning to feel the weight of the heavy financial burden bearing down on regional governments. There are 319 mono-cities that together house 14 million Russians (roughly 10 percent of the country's entire population). The cities are a relic of the Soviet period, when towns relied on one industry or plant to employ the bulk of their populations, sustain their economies and provide social services. Most Russian mono-cities center on manufacturing, metallurgy, timber or fuels, which make up 30 percent of the country's industrial production. The inherent problem with the mono-city structure is that it creates an inflexible economy. Furthermore, the mono-city workforce is trained to work in a single industry, making it difficult for laborers to migrate elsewhere for better jobs or salaries.

Most of these cities require subsidies from the federal government or from Russia's oligarchs to survive. In a recent visit to the mono-city of Usolye-Sibirskoye, Russian Prime Minister Dmitri Medvedev said only 79 of the country's 319 mono-cities were economically stable, adding that the federal government would not be able to save the other 240. According to Russian Economic Development Minister Alexei Ulyukayev, 94 single-industry cities are "in the red zone," meaning they are nearing economic collapse or bankruptcy. Though the Kremlin has set aside a fund of $525 million for Russia's mono-cities, Ulyukayev has pointed out that this amount is only enough to help about 20 towns for a year.

When the mono-cities began slowing in 2009, during the recession, workers with no alternative employment...


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