We need to bring Russia back into the fold – The Property Chronicle
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We need to bring Russia back into the fold

The Analyst

As the global commodity price cycle begins its downward swing, Russia is set to be hit hard, forcing Putin to reassert himself – unless the West acts first

The impending worldwide recession will act as the final stage in the decline of commodity prices that has been happening since 2011, bringing political as well as economic risks for countries whose revenues are commodity-price dependent – such as Russia.

It should come as no surprise that Russia is essentially a commodity-dependent economy. When, in its most recent empire form as the USSR, it faced off against the US in the cold war, this defining characteristic shaped the nature of the standoff – which was in essence a struggle between a commodity- producing system and a commodity-consuming one (the West).

So when prices increased from 1950 into the 1975 peak – the upward-trending half of Nikolai Kondratiev’s 50-year k-wave commodity cycle – the USSR looked like it was winning. But when prices then dropped down the other side of the 1975 peak, the reverse happened. Ultimately the economy of the USSR collapsed as its massively high defence spending could not be maintained by the lower prices of commodities into the 1990s.

Run the clock forward to Putin’s Russia today. From 2000 to 2012 Putin’s position was cemented by high commodity prices, which made him look a heroic leader. However, since 2012 those prices have fallen and thus so has Russia’s economic wealth – a situation made worse by the twin forces of the kleptocracy imposing inefficiencies on the nation and western sanctions. It is testament to Putin’s power as a leader that he has managed to stay in office for so long. However, a crisis may soon be upon him, as the global economy moves into a deep recession or depression in the next 18 months and the economy of Russia weakens further.

The Analyst

About David Murrin

David Murrin

David’s extraordinary career has taken him from the oil fields of Papua New Guinea in the 1970s, through the trading floor of JPMorgan in the ‘80s to his own Hedge Funds in the 1990s. After successfully selling those Funds he has, since 2008, been running an African Land Fund as well as writing prolifically and with amazing prescience. For more information on his books, long and short articles and how to book him as a speaker please go to www.davidmurrin.co.uk.

Articles by David Murrin

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