COVID-19 and Russia

Abstract

Russia was hit hard by the pandemic. However, its economic consequences were milder and recovery came faster than initially expected. Several factors (briefly outlined in the chapter) contributed to this. One of them was of an existential nature. Russia unwillingly happened to be well equipped to face the global disruption of economic ties and COVID-related restrictions. A series of deep external shocks that regularly hit Russia’s newly established market economy since the default and devaluation of 1998 made the elite suspectable of unconditional embracing global finance. This sentiment translated into amassing international reserves and a drastic reduction of the international debt of the Russian state since the early 2000s. The pandemic did not change the trend, in fact the accumulation of reserves continued despite the calls to resort to them for the implementation of social relief policies. On the other hand, the combined effect of the devaluations, the impact of the Great Recession and the sanctions imposed on Russia since 2014 had induced import substitution and the adjustment of domestic production and consumption before the arrival of COVID that disrupted international trade. COVID crises did not generate any new trend in Russia’s economic profession. Rather, it reinforced the economic policy approaches emerged in the late 1980s and 1990s. In the chapter, we delineated four such approaches which express the attitudes of different elements among the Russian establishment. It seems plausible in retrospect that the pandemic triggered the recombination in the establishment. We presume that with the pandemic becoming the history, the future of Russian political and economic system will be defined by the eventual balance of forces resulting of this recombination. If so, the description of four approaches is the main result obtained in this chapter.