A catastrophic record

Invasion of Ukraine
Russian President Vladimir Putin speaks about Russia's military operation in Ukraine, in Moscow, Russia.

Russian President Vladimir Putin speaks about Russia's military operation in Ukraine, in Moscow, Russia.


picture alliance / AA | Kremlin Press Office/Handout

What is happening in Ukraine in these hours and days is a tragedy. Vladimir Putin is launching a war of aggression on a defenseless neighbor - without regard for international law. One does not have to be inclined to pathos to realize that this the end of the cooperative period of peace since the collapse of Soviet communism. This began gradually: with the Russian interventions in Georgia in 2008 and with the invasion of Crimea in 2014. Today, it is finally over.

Now, before a new era begins, it makes sense to take stock: What has Vladimir Putin made of his country over the past two decades? Politically, the result is obvious: an autocratically ruled nation in which democratic tendencies are fiercely opposed and nationalist emotions are permanently stirred up. It may be that the West is partly to blame for this, because it has denied Russia a legitimate place in a European security architecture for too long. But in any case, the result is devastating. And it is Putin who bears the central responsibility for this.

Putin is occasionally credited with returning Russia to a stable economic path. This may be true for the very first years of his tenure - after the chaos, inflation and currency collapse of the Yeltsin years. But for the period after, Putin's record is almost as sad economically as it is politically. Three central points stand out:

1. Resource dependence: Putin has completely failed to diversify the economy: toward a vital commercial middle class that is integrating itself into the high-tech segments of the world market through increasing innovation and diversity of its product range - despite a good level of education among the population. Most of the growth in exports is due to the commodity boom, which made a small elite of (Putin-loyal?) oligarchs rich, but had little effect on the rest of society. The inequality in Russian society is enormous and has no equal anywhere in the world. The gap between the expensive centers like Moscow and St. Petersburg on the one hand and the flat countryside of the Russian provinces on the other is beyond anything you can find in other industrialized nations in terms of regional differences.

2. Capital escape: The class of rich oligarchs shifted their huge and growing fortunes abroad - out of mistrust in the stability of their own government and its power structures. Year after year, a large part of Russia's impressive current account surpluses was parked in real estate, soccer clubs or other assets in London, Berlin, Switzerland, Cyprus, or elsewhere. Assets in the estimated order of up to a trillion U.S. dollars are lying abroad - instead of being invested in Russia and working for the well-being and future of its citizens. For example, comparably wealthy Americans  donate and fundraise for their private universities, which is not the case in Russia - despite extremely concentrated wealth.

3. Economic growth: Since the occupation of Crimea - now eight years ago - Russia has clearly lost further economic ground to the West. This is due less to the sanctions, which act more as needle sticks, than to the structural deficits, which are harmful to a new dynamic and are having an increasingly strong impact on the trend. Some figures: As recently as 2013, Russia's economic output accounted for 13.7 percent of the U.S. Today, it is 7 percent. In relation to the EU's economic output, fell from 12.9 percent to 10.9 percent over the same period. Russia's total economic output is less than half of Germany's gross domestic product.  Russia's per capita income today is also just a third of the EU average. Economically, Russia is not a great power - and it is moving further and further away from this classification.

Conclusion: A devastating outcome not only politically, but also economically. However, this does not mean that Russia will capitulate to a massively expanded arsenal of sanctions in the near future. The opposite is true: High current account surpluses due to raw material exports - most recently over 7 percent of gross domestic product - have ensured huge stocks of foreign exchange reserves, which the autocrat Putin can easily draw on. Nevertheless, tough sanctions are absolutely right and necessary - as a political sign of the West's common values front against Putin's violations of international law.

And time is playing for the West. Even if Putin pursues a new "Eastern Strategy" of Eurasian integration. It makes a huge difference whether Russia integrates itself into the high-tech sectors of world markets or cultivates a network of dependencies with the former Soviet republics and selected friendly nations around the world. Whether China will be one of them is questionable, moreover, because China itself has strong interests in integrating further elsewhere in the world market.

In short: Dark prospects not only for Ukraine, but also for Russia. Thanks to Putin. So the West can certainly be self-confident in the long run. And this is necessary due to the current extremely dangerous crisis. An uncertain future lies ahead.