The Collapse of Russia. What happens next?

[Flat Bear]

The West must prepare for the imminent collapse of Putin’s Russia

Putin ignored every lesson of history, leaving Russia's economy on the brink

MATTHEW LYNN3 March 2023 • 4:55pm

Vladimir Putin's ally billionaire Oleg Deripaska has warned the country is running out of money CREDIT: ILIA PITALEV/AFP via Getty Images

Demand for its oil and gas has been choked off. Sanctions are finally starting to bite. The costs of a war that the Kremlin expected to be over in a matter of weeks are escalating wildly out of control, and the state is increasingly having to rely on borrowing to keep going.

Even supposed allies of the Russian regime, such as the billionaire Oleg Deripaska, are now warning that the country is close to running out of money. 

Vladimir Putin ignored almost every lesson of history when he invaded Ukraine just over a year ago. But the one that might well haunt him the most is this: wars of attrition are brutally expensive, and are usually won by whoever has the deepest pockets and the productive capacity to keep up the fight for the longest. That isn’t going to be Russia. 

It could even be that the total collapse of Russia’s economy is not far away. And if it is, it will happen a lot more quickly than anyone currently thinks.

Advertisement

If we are to avoid a repeat of the events that followed the disintegration of the Soviet Union in 1991 – when the economy fell apart , the oligarchs took control, and Russia ended up becoming a corrupt, gangster state intent on re-establishing its empire – the West needs to be ready. 

It has taken longer than anyone thought, but the economic pressure on the Kremlin is finally starting to tell. True, last year the country got away with a fairly modest 2.2pc contraction in GDP, at least if you believe the official figures. This year, however, is going to be much worse. 

There are estimates that output fell by 6pc to 7pc in the last quarter of the year, and the decline will only have accelerated since then. Europe, including the UK, has managed to wean itself off Russian oil and gas, its main customer, far faster than was expected. The G7 has imposed a price cap of $60 on Urals oil, and while some customers will inevitably avoid that the price has still dropped by 20pc since December, hitting revenues hard. 

Companies might have been too slow about it – no one knows why the typically sanctimonious Unilever is still there – but they are steadily winding down their operations in the country, laying off staff and closing down units. The Russian budget deficit is climbing at an alarming rate, as tax revenue collapses.

“There will be no money already next year,” Deripaska, the metals tycoon already subject to American, British and EU sanctions, told a conference in Siberia this week. “We will need foreign investors.”

That much is certainly true. The spending on the war has escalated dramatically. According to an analysis by Reuters, the military and security budget has risen to $155bn, or a third of all state spending. Putin and his generals may have planned a lightning campaign leading to a victory parade through the streets of Kyiv within a matter of weeks. But that is not the way it has worked out. 

Instead, Russia is bogged down in a brutal war of attrition along a stretched front line that is consuming men and machinery on an epic scale. And if the fighting is tragically reminiscent of the First World War, then there will be similarities in the economic context, too. The Great War was effectively over once the economic might of the United States was thrown behind the Allies. 

It is possible that China may step in to help Russia out. But it would be rash to count on it. The Chinese, and especially President Xi, are not sentimental, and they are certainly not interested in losers.

It is hard to see that they have anything to gain by bailing Putin out. And without help from China, it is impossible that Russia’s shrinking economy can match the spending power of the West (and the White House announced another $400m of help only yesterday). A total economic collapse is simply a matter of time. 

The West needs to be ready for that. When the Soviet Union fell apart in 1991 the response was a total disaster. The country was allowed to sink into chaos, with GDP falling by a shocking 45pc between 1988 and 1998. 

It was hardly surprising against that backdrop that industry fell into the hands of a corrupt group of oligarchs, and that an authoritarian state controlled by Putin quickly took charge. We ended up with a repressive, militarised regime, threatening its neighbours, and repressing its people. In other words, right back at square one. 

The collapse of 2023 needs to be handled very differently. Like the post-war reconstruction of Japan and Germany, or indeed, the post-Soviet rebuilding of Poland, now on track to be richer than Britain, at least according to Sir Keir Starmer (who conveniently forgets to mention that it will also be richer than Spain and France), it needs to create small businesses, back entrepreneurs not robber barons, and encourage free and competitive markets operating under the rule of law instead of a gangster clique entirely dependent on favours from the Government. 

None of that is going to be easy, but then it wasn’t easy in Japan and Germany, either. It will require massive financial assistance when the Putin regime falls apart to stop output going into freefall, and that will be expensive, especially at a time when we will need to help Ukraine rebuild as well. 

Even more importantly it will take slow, patient institution building. If successful, however, there will be at least a chance of a modern, liberal democracy emerging from the ruins of this dreadful war. And that will be a neighbour the rest of us can finally live with. 

In reality, Russia’s economic collapse is not far off – and this time around the West needs to have a plan ready for when it happens. 

[Roman Roady]

and Pakistan is on the brink...circa 100M people in a not entirely benign part of the world....and it has nukes.

[ChrisSussex]

If you believe Russia is going to collapse anytime soon then I have a bridge in London to sell you.

[Young Turk]

9 minutes ago, Flat Bear said:

It is possible that China may step in to help Russia out. But it would be rash to count on it. The Chinese, and especially President Xi, are not sentimental, and they are certainly not interested in losers.

They are pretty bloody interested in North Korea! Can you get more loserish than them?

[DarkHorseWaits-NoMore]

Could be?

Quote

...The costs of a war that the Kremlin expected to be over in a matter of weeks are escalating wildly out of control, and the state is increasingly having to rely on borrowing to keep going.

Russian debt to GDP ratio ~20%
UK debt to GDP ratio ~100%

https://tradingeconomics.com/russia/government-debt-to-gdp

 

 

 

 

 

[ftb_fml]

9 minutes ago, DarkHorseWaits-NoMore said:

Could be?

Russian debt to GDP ratio ~20%
UK debt to GDP ratio ~100%

https://tradingeconomics.com/russia/government-debt-to-gdp

 

 

 

 

 

Isn't the Russian economy quite inflationary though; thus reducing the serverity of their debt at a faster rate than ours? Not saying that the UK isn't a clusterfck or that the irony is lost on me of how badly we're doing compared to an international outcast with a despot dictator at the helm..

[Flat Bear]

16 minutes ago, ChrisSussex said:

If you believe Russia is going to collapse anytime soon then I have a bridge in London to sell you.

I have absolutely no doubt that the spring (early summer?) offensive will be decisive and overkill.

The Ukrainians and the US are still overestimating Russia and they want to make absolutely sure of total victory. (there can not be any other outcome) The victory will be much easier and quicker than the over cautious allies think that is clear.

BUT

The questions remains what happens to Russia after the event?

There are approx. 140 million people living in Russia (approx 1.5% of the world population) , what will become of this very diverse population? What will happen at the Kremlin? How will internal strife and conflict get resolved? and how will Russia defend itself from external as well as internal uprising and invasion?

How will this affect us?

[Flat Bear]

37 minutes ago, Roman Roady said:

and Pakistan is on the brink...circa 100M people in a not entirely benign part of the world....and it has nukes.

and it has nukes.

Yes. And this is why we have the kid gloves on in Ukraine. This is the only reason Russia is still in existence and thus the slowly slowly catchy monkey tactics by the west.

It will be of concern until Russia has succombed.

[70PC]

1 hour ago, DarkHorseWaits-NoMore said:

Could be?

Russian debt to GDP ratio ~20%
UK debt to GDP ratio ~100%

https://tradingeconomics.com/russia/government-debt-to-gdp

 

 

 

 

 

UK is not in good yardstick for success but numbers are not static.

United Kingdom Public Sector Net Debt to GDP

 

Russia recorded a Government Debt to GDP 

[rollover]

Russia has been collapsing since last April, according to some experts on this forum, init?

[Chunketh]

49 minutes ago, rollover said:

Russia has been collapsing since last April, according to some experts on this forum, init?

Now now my little Putin troll. Don’t worry, daddy vlad will pay those cheques for a while yet.

[MonsieurCopperCrutch]

1 hour ago, rollover said:

Russia has been collapsing since last April, according to some experts on this forum, init?

According to who? First I've read of that.

[BubbleBoi]

3 hours ago, Flat Bear said:

The West must prepare for the imminent collapse of Putin’s Russia

Putin ignored every lesson of history, leaving Russia's economy on the brink

MATTHEW LYNN3 March 2023 • 4:55pm

Vladimir Putin's ally billionaire Oleg Deripaska has warned the country is running out of money CREDIT: ILIA PITALEV/AFP via Getty Images

Demand for its oil and gas has been choked off. Sanctions are finally starting to bite. The costs of a war that the Kremlin expected to be over in a matter of weeks are escalating wildly out of control, and the state is increasingly having to rely on borrowing to keep going.

Even supposed allies of the Russian regime, such as the billionaire Oleg Deripaska, are now warning that the country is close to running out of money. 

Vladimir Putin ignored almost every lesson of history when he invaded Ukraine just over a year ago. But the one that might well haunt him the most is this: wars of attrition are brutally expensive, and are usually won by whoever has the deepest pockets and the productive capacity to keep up the fight for the longest. That isn’t going to be Russia. 

It could even be that the total collapse of Russia’s economy is not far away. And if it is, it will happen a lot more quickly than anyone currently thinks.

Advertisement

If we are to avoid a repeat of the events that followed the disintegration of the Soviet Union in 1991 – when the economy fell apart , the oligarchs took control, and Russia ended up becoming a corrupt, gangster state intent on re-establishing its empire – the West needs to be ready. 

It has taken longer than anyone thought, but the economic pressure on the Kremlin is finally starting to tell. True, last year the country got away with a fairly modest 2.2pc contraction in GDP, at least if you believe the official figures. This year, however, is going to be much worse. 

There are estimates that output fell by 6pc to 7pc in the last quarter of the year, and the decline will only have accelerated since then. Europe, including the UK, has managed to wean itself off Russian oil and gas, its main customer, far faster than was expected. The G7 has imposed a price cap of $60 on Urals oil, and while some customers will inevitably avoid that the price has still dropped by 20pc since December, hitting revenues hard. 

Companies might have been too slow about it – no one knows why the typically sanctimonious Unilever is still there – but they are steadily winding down their operations in the country, laying off staff and closing down units. The Russian budget deficit is climbing at an alarming rate, as tax revenue collapses.

“There will be no money already next year,” Deripaska, the metals tycoon already subject to American, British and EU sanctions, told a conference in Siberia this week. “We will need foreign investors.”

That much is certainly true. The spending on the war has escalated dramatically. According to an analysis by Reuters, the military and security budget has risen to $155bn, or a third of all state spending. Putin and his generals may have planned a lightning campaign leading to a victory parade through the streets of Kyiv within a matter of weeks. But that is not the way it has worked out. 

Instead, Russia is bogged down in a brutal war of attrition along a stretched front line that is consuming men and machinery on an epic scale. And if the fighting is tragically reminiscent of the First World War, then there will be similarities in the economic context, too. The Great War was effectively over once the economic might of the United States was thrown behind the Allies. 

It is possible that China may step in to help Russia out. But it would be rash to count on it. The Chinese, and especially President Xi, are not sentimental, and they are certainly not interested in losers.

It is hard to see that they have anything to gain by bailing Putin out. And without help from China, it is impossible that Russia’s shrinking economy can match the spending power of the West (and the White House announced another $400m of help only yesterday). A total economic collapse is simply a matter of time. 

The West needs to be ready for that. When the Soviet Union fell apart in 1991 the response was a total disaster. The country was allowed to sink into chaos, with GDP falling by a shocking 45pc between 1988 and 1998. 

It was hardly surprising against that backdrop that industry fell into the hands of a corrupt group of oligarchs, and that an authoritarian state controlled by Putin quickly took charge. We ended up with a repressive, militarised regime, threatening its neighbours, and repressing its people. In other words, right back at square one. 

The collapse of 2023 needs to be handled very differently. Like the post-war reconstruction of Japan and Germany, or indeed, the post-Soviet rebuilding of Poland, now on track to be richer than Britain, at least according to Sir Keir Starmer (who conveniently forgets to mention that it will also be richer than Spain and France), it needs to create small businesses, back entrepreneurs not robber barons, and encourage free and competitive markets operating under the rule of law instead of a gangster clique entirely dependent on favours from the Government. 

None of that is going to be easy, but then it wasn’t easy in Japan and Germany, either. It will require massive financial assistance when the Putin regime falls apart to stop output going into freefall, and that will be expensive, especially at a time when we will need to help Ukraine rebuild as well. 

Even more importantly it will take slow, patient institution building. If successful, however, there will be at least a chance of a modern, liberal democracy emerging from the ruins of this dreadful war. And that will be a neighbour the rest of us can finally live with. 

In reality, Russia’s economic collapse is not far off – and this time around the West needs to have a plan ready for when it happens. 

Turn off your TV, seriously

[muyuubyou]

Russia has been in a quantum state of collapse since the 90s, the question is if the current political order will survive or not and how to deal with that

[Big Orange]

38 minutes ago, muyuubyou said:

Russia has been in a quantum state of collapse since the 90s, the question is if the current political order will survive or not and how to deal with that

Yeah, the Putin regime and current invasion of Ukraine (plus the hassling of Belarus and Georgia) are all massive aftershocks of the Soviet Russian Empire dying around 1986-1991.

[pig]

6 hours ago, Flat Bear said:

I have absolutely no doubt that the spring (early summer?) offensive will be decisive and overkill.

The Ukrainians and the US are still overestimating Russia and they want to make absolutely sure of total victory. (there can not be any other outcome) The victory will be much easier and quicker than the over cautious allies think that is clear.

BUT

The questions remains what happens to Russia after the event?

There are approx. 140 million people living in Russia (approx 1.5% of the world population) , what will become of this very diverse population? What will happen at the Kremlin? How will internal strife and conflict get resolved? and how will Russia defend itself from external as well as internal uprising and invasion?

How will this affect us?

Most of what I've read/heard is cautious on the idea of sudden economic collapse now: more an increasingly bleak looking future, including a demographic time bomb.

They are currently burning through their sovereign wealth fund though - maybe this is why the speculation on China stepping in.

Now they've radicalised them, its difficult to see how they can afford to Ukrainians subjugated militarily forever. Theres lots of bits of news about hybrid war in Moldova and the Balkans so maybe thats what they are hoping to do.

https://thehill.com/opinion/international/3877659-russias-hybrid-warfare-playbook-now-includes-moldova-and-the-balkans/

On the other hand if Ukraine does serious damage to Russias territorial hold this year that could precipitate some sort of political strife in Russia.

[ChrisSussex]

12 hours ago, Flat Bear said:

I have absolutely no doubt that the spring (early summer?) offensive will be decisive and overkill.

The Ukrainians and the US are still overestimating Russia and they want to make absolutely sure of total victory. (there can not be any other outcome) The victory will be much easier and quicker than the over cautious allies think that is clear.

 

Hitler and Napoleon also over estimated the Russians. Can you meet me by tower bridge on Wednesday of next week, and bring your cheque book. Thanks.

[reddog]

At this point even if Russia where to "win" by getting a bit of land, it would actually have lost due to accelerating emigration of young people and reduction an already low fertility rate.

 

A guess some sort of peace deal will happen eventually.  But what about when Putin leaves office voluntarily or otherwise.  That must lead to a lot of instability as a war starts for the top job.  Also imagine smaller autonomous areas to cleave off.  I think that is the best we can hope for TBH.

[regprentice]

no-one really wants russia. Even Lenin saw Germany as a better place to start a Europe wide communist revolution than Russia. 

Arguably the dissolution of the British empire was a mistake, if we pick up Russia and Pakistan cheap thats a decent, if rather anemic, start to British Empire 2.0 .

Shame the queen didnt live to see it. 

[Depressedpedro]

Problem for Russia is it 9s so heavily dependent on energy, at a time when energy is about to drastically shift away from those sources Russia export.

For Putin the war was mow or never, they will never earn as much from energy as they will from the first couple of years of the war. China may well take some of the strain bit even they are heavily investing in their own renewable and with their demographics about to turn southwards that permagrowth will eventually run out of room.

The fact Russia is burning through its strategic reserve at a rapid rate and given energy prices are much reduced vs 2022 peak levels means they may not have much left in the tank and sweeping cuts will be needed across Russia to keep the military going. 

[BorrowToLeech]

14 hours ago, Flat Bear said:

Vladimir Putin's ally billionaire Oleg Deripaska has warned the country is running out of money CREDIT: ILIA PITALEV/AFP via Getty Images

Demand for its oil and gas has been choked off. Sanctions are finally starting to bite. The costs of a war that the Kremlin expected to be over in a matter of weeks are escalating wildly out of control, and the state is increasingly having to rely on borrowing to keep going.

Even supposed allies of the Russian regime, such as the billionaire Oleg Deripaska, are now warning that the country is close to running out of money. 

Vladimir Putin ignored almost every lesson of history when he invaded Ukraine just over a year ago. But the one that might well haunt him the most is this: wars of attrition are brutally expensive, and are usually won by whoever has the deepest pockets and the productive capacity to keep up the fight for the longest. That isn’t going to be Russia. 

It could even be that the total collapse of Russia’s economy is not far away. And if it is, it will happen a lot more quickly than anyone currently thinks.

Advertisement

If we are to avoid a repeat of the events that followed the disintegration of the Soviet Union in 1991 – when the economy fell apart , the oligarchs took control, and Russia ended up becoming a corrupt, gangster state intent on re-establishing its empire – the West needs to be ready. 

It has taken longer than anyone thought, but the economic pressure on the Kremlin is finally starting to tell. True, last year the country got away with a fairly modest 2.2pc contraction in GDP, at least if you believe the official figures. This year, however, is going to be much worse. 

There are estimates that output fell by 6pc to 7pc in the last quarter of the year, and the decline will only have accelerated since then. Europe, including the UK, has managed to wean itself off Russian oil and gas, its main customer, far faster than was expected. The G7 has imposed a price cap of $60 on Urals oil, and while some customers will inevitably avoid that the price has still dropped by 20pc since December, hitting revenues hard. 

Companies might have been too slow about it – no one knows why the typically sanctimonious Unilever is still there – but they are steadily winding down their operations in the country, laying off staff and closing down units. The Russian budget deficit is climbing at an alarming rate, as tax revenue collapses.

“There will be no money already next year,” Deripaska, the metals tycoon already subject to American, British and EU sanctions, told a conference in Siberia this week. “We will need foreign investors.”

That much is certainly true. The spending on the war has escalated dramatically. According to an analysis by Reuters, the military and security budget has risen to $155bn, or a third of all state spending. Putin and his generals may have planned a lightning campaign leading to a victory parade through the streets of Kyiv within a matter of weeks. But that is not the way it has worked out. 

Instead, Russia is bogged down in a brutal war of attrition along a stretched front line that is consuming men and machinery on an epic scale. And if the fighting is tragically reminiscent of the First World War, then there will be similarities in the economic context, too. The Great War was effectively over once the economic might of the United States was thrown behind the Allies. 

It is possible that China may step in to help Russia out. But it would be rash to count on it. The Chinese, and especially President Xi, are not sentimental, and they are certainly not interested in losers.

It is hard to see that they have anything to gain by bailing Putin out. And without help from China, it is impossible that Russia’s shrinking economy can match the spending power of the West (and the White House announced another $400m of help only yesterday). A total economic collapse is simply a matter of time. 

The West needs to be ready for that. When the Soviet Union fell apart in 1991 the response was a total disaster. The country was allowed to sink into chaos, with GDP falling by a shocking 45pc between 1988 and 1998. 

It was hardly surprising against that backdrop that industry fell into the hands of a corrupt group of oligarchs, and that an authoritarian state controlled by Putin quickly took charge. We ended up with a repressive, militarised regime, threatening its neighbours, and repressing its people. In other words, right back at square one. 

The collapse of 2023 needs to be handled very differently. Like the post-war reconstruction of Japan and Germany, or indeed, the post-Soviet rebuilding of Poland, now on track to be richer than Britain, at least according to Sir Keir Starmer (who conveniently forgets to mention that it will also be richer than Spain and France), it needs to create small businesses, back entrepreneurs not robber barons, and encourage free and competitive markets operating under the rule of law instead of a gangster clique entirely dependent on favours from the Government. 

None of that is going to be easy, but then it wasn’t easy in Japan and Germany, either. It will require massive financial assistance when the Putin regime falls apart to stop output going into freefall, and that will be expensive, especially at a time when we will need to help Ukraine rebuild as well. 

Even more importantly it will take slow, patient institution building. If successful, however, there will be at least a chance of a modern, liberal democracy emerging from the ruins of this dreadful war. And that will be a neighbour the rest of us can finally live with. 

In reality, Russia’s economic collapse is not far off – and this time around the West needs to have a plan ready for when it happens. 

Small world, I guess. 

https://www.independent.co.uk/news/uk/politics/lord-mandelson-in-conflict-of-interest-row-over-oligarch-1830667.html?amp

https://amp.theguardian.com/politics/2008/oct/21/mandelson-georgeosborne
 

https://www.thetimes.co.uk/article/starmer-calls-in-mandelson-to-inject-a-dose-of-new-labours-winning-mentality-wr0w25jpb

 

Edited March 5, 2023 by BorrowToLeech

[Big Orange]

1 hour ago, ChrisSussex said:

 

Hitler and Napoleon also over estimated the Russians. Can you meet me by tower bridge on Wednesday of next week, and bring your cheque book. Thanks.

Allied Germany and Britain in a alternate WW2 reality would've absolutely creamed European Russia, and in Hitler's and Naploean's case the Russo-Ukrainian-Belarus steppes were a massive army sink to waste hundreds of thousands to millions of troops (whilst they were at war with major Western enemies at the same time). 

Ironically Ukraine, the 2nd biggest country after Russia in Europe, is a giant army sink and its bombed out cities are highly defensible meatgrinders, plus its post-Soviet military has resolved more of its corruption issues and outdatedness next to Putin's forces.

[BorrowToLeech]

10 hours ago, Big Orange said:

Yeah, the Putin regime and current invasion of Ukraine (plus the hassling of Belarus and Georgia) are all massive aftershocks of the Soviet Russian Empire dying around 1986-1991.

Which was itself an aftershock to the collapse of the Russian Empire and the disaster of WW1. Not sure what this adds, but it is interesting maybe. 

Edited March 5, 2023 by BorrowToLeech

[muyuubyou]

9 minutes ago, Depressedpedro said:

Problem for Russia is it 9s so heavily dependent on energy, at a time when energy is about to drastically shift away from those sources Russia export.

For Putin the war was mow or never, they will never earn as much from energy as they will from the first couple of years of the war. China may well take some of the strain bit even they are heavily investing in their own renewable and with their demographics about to turn southwards that permagrowth will eventually run out of room.

The fact Russia is burning through its strategic reserve at a rapid rate and given energy prices are much reduced vs 2022 peak levels means they may not have much left in the tank and sweeping cuts will be needed across Russia to keep the military going. 

fossil fuels will continue to be necessary and valuable for the foreseeable future, but perhaps not at the price Russia needs to sustain their expansionist efforts

Russia is the most resource-rich country in the world and they will have that going for them no matter what, but the current political establishment seems flaky and this might unfold soonish, the question is whether their next leader will follow on Putin's priorities or not

[rollover]

11 hours ago, MonsieurCopperCrutch said:

According to who? First I've read of that.

At the time, you were too busy with Bitcoin bubble, not paying enough attention what was happening around you ... init?