ED: This article is one of a series called The Fourth Russia that imagines what the world will be like five years in the future. It is pure speculation based on best-guess assumptions and is designed to be a jumping off point for thinking about what the longer-term consequences of the war in Ukraine will be for Russia, Europe and the world.
The year is 2027 and it is five years since Russia invaded Ukraine. Just how much progress has the country made since then and just how much damage has the extreme sanction regime imposed on Russia done?
The world was changed in 2022. Today critics say that Russian President Vladimir Putin’s attempt to force a new security deal on Nato was a missed opportunity. After he died suddenly from leukaemia shortly before the 2024 presidential elections secretary of the Security Council of Russia Nikolai Patrushev was a shoo-in but has proved to be even more intransigent than his predecessor.
Patrushev’s decision to expand Russia’s military presence in the northern, western and southern military districts, as well as move significant hardware into Novorossiysk and Crimea that can reach the entire Mediterranean boards as well as beef up its naval base at Taras in Syria have alarmed Kyiv and Washington, as Russia reasserts itself in the region already wracked by food insecurity and social unrest following the food crisis in 2022.
The four-year global recession that started in 2022 after commodity and energy prices spiked has caused international relations to become brittle, and the intense US pressure on the rest of the global community as it tried to enforce its harsh sanctions did a lot of damage, forcing countries to choose sides in a fight they would have preferred to sit out.
The bread riots that broke out in North Africa in the autumn of 2022 and famine in many sub-Saharan countries continue to destabilise the region but has opened the door to Russian soft power with its “feed the world” campaign and cheap grain supplies.
The world has been broken into two, with many developing countries in the Global South welcoming Moscow’s support, and already not very liberal, have subscribed to the Moscow Consensus, which puts the interests of the state over those of the individual that is the core of the Washington consensus.
Russia laid the groundwork for this support with its active distribution of its Sputnik V vaccine during the coronavirus (Covid-19) pandemic in 2020 and there is still a lot of resentment over the West’s so-called vaccine apartheid. Following the outbreak of Covid-26 last year, many of the countries in the Global South are once again looking to Moscow for help.
Fourth Russia
When the invasion of Ukraine started on February 24, 2022 many said that Russia had returned to the Soviet Union, but instead Russia has emerged in a fourth reincarnation.
The first was 1,000 years of Tsarist Russia that dramatically gave way to the Bolshevik Russia following the October revolution. That too passed away dramatically with the collapse of the Soviet Union in December 1991, leading to three brief decades of relative prosperity and progress. However, with Putin’s decision to attack Ukraine the “Free Russia” period also came to an abrupt end and the country now finds itself in a fourth phase.
Russia has moved on from Lenin’s vision and retains a mix of free market economics coupled with autarky, and global trade limited by sanctions. It is a pseudo-democracy run by a repressive political elite. The leadership needs to win a large share of the popular vote, but it tolerates no dissent and is not against throwing its opposition into jail. Opposition blogger Alexei Navalny has now served six years of his 38-year sentence.
The combination of the war in Ukraine and the global pandemic brought the process of globalisation to an end, but the war also raised serious concerns amongst many of the non-aligned nations that only became apparent in the following years.
The other emerging markets, particularly China, were concerned by the weaponisation of the dollar and use of trade restrictions to punish Russia and have been reluctant to join the sanctions regime or ostracise Moscow. The decision to force Russia into default on its bond obligations, despite its willingness and ability to pay, has led many nations to rethink their debt strategies.
It has also led to closer geopolitical co-operation amongst the Emerging Markets, roughly based on the G20, that seek to balance the power of the West with the new Global South alliance, led by the Russia-China axis.
The change in orientation was most noticeable at the G20 summit in Indonesia in 2022, which Putin personally attended, to the protestations of Washington that boycotted all the Russian sessions.
G20 leaders, especially China’s President Xi Jinping, went out of their way to show their support for Putin, but still maintained enough distance to avoid bringing down US sanctions on themselves. At the event Putin gave a triumphant speech about how the US hegemony over geopolitics had finally been broken.
The same sentiments were on display at the second Russia Africa Summit held later the same month, where 35 African leaders made the trip – down from the 48 that attended the first summit in 2019.
Cut off from Western markets, Russia has increasingly been reorienting towards China and other emerging markets that are less squeamish about its invasion of Ukraine; Indonesia notably refused to disinvite Russia from the G20 summit in Jakarta in November that year.
Many speculated that Moscow would become the junior partner to Beijing, but the tensions between Beijing and Washington remain high since the Taiwan crisis in 2024 and the US attempt to force through the Asia-Atlantic Comprehensive Free Trade Agreement (AACFTA) in the last two years. The clash between the US and China for advantage in Asia has kept the Russo-China relationship more balanced. China needs Russia's potential military threat to Europe, especially since the fragile ceasefire with Ukraine was signed in the autumn of 2022, to complement its own power in Asia that has contained US ambitions to open up Asia.
At the same time, the BRICS organisation has grown in prominence, becoming the Emerging Market equivalent to the G7 of leading industrial nations. The body was originally a marketing term invented by Goldman Sachs’ chief economist Jim O’Neill, but then became first an economic club but is increasingly playing a geopolitical role. That has been enhanced in the last few years after the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) joined as official observers, representing the Arab world at the regular BRICS meetings.
The Russia Africa Summit is now in its seventh year and Russia has emerged as a major investor into Africa, rapidly expanding its mining and agribusiness, arms and energy sales, and increasingly its leading retail and banks are moving in to exploit Africa’s emerging middle class in conditions that are almost identical to those Russia experienced in the noughties.
Regionalisation
At the same time, the SWIFT sanctions on Russia at the start of the war have had far-reaching consequences. As other emerging markets became nervous of exposing themselves to the US’ ability to weaponise the dollar. Russia’s MIR credit card payment system and the SPFS (System for Transfer of Financial Messages) messaging system that works in parallel to SWIFT have been adopted by dozens of countries and have become the basis of Russia’s international trade and settlement system.
These systems found willing partners in the rest of the Emerging World as countries like China were keen to insulate themselves from potential US sanctions, accelerating the de-dollarisation of global trade. Russia and the other BRIC nations now do half of their trade in national currencies, with the yuan emerging as a new global reserve currency, up from nothing in 2008.
Globalisation has given way to regionalisation, where groups of countries form regional security and trade alliances, such as Turkey in the Caucasus and Central Asia, as well as the Balkan states and SE Asia that is dominated by China. As the general store to many of these groups, Russia has sought to capitalise on the regional associations that are also interested in insulating themselves against Western power in their geographies.
Turkey has been a big winner from the war as one of the few countries that has been able to play both sides of the showdown. Turkish President Recep Tayyip Erdogan was already working hard to expand his influence in his region and the war has only strengthened his hand. Central Asia has also made real gains as Russia focuses on opening up the North-South corridor into Asia via Central Asia.
The Taliban was in Lahore again last September to meet Sergei Petrov, the new Russian Foreign Minister that Putin picked from obscurity following Sergei Lavrov’s death last year from lung cancer. A 30-year investment and gas transit deal is on the table that is supposed to be signed by the end of this year. That will be accompanied by a new railway and other infrastructure investments, says Petrov, as well as rare earth metal mineral extraction rights worth an estimated $50bn that will be jointly exploited with China.
The talks are expected to be difficult, but after three years of famine, as Afghanistan was especially hard hit by the global food insecurity crisis caused by the Ukraine war, the Taliban are in a mood to compromise, especially as the Kremlin has included guaranteed grain and arms supplies as part of the deal.
The new Afghan vector will open Central Asia, and by extension Russia, up to the massive Asian markets and give Russia new customers for its oil and gas exports over the medium term, say experts.
Foreign trade still accounts for over 44% of Russia’s GDP, while in the USSR of the mid-1980s it was less than 5%. For Russia trade in commodities and energy has grown even more important as a geopolitical tool, leading to the so-called commodity wars.
In the boom years of the noughties most of Russia’s raw materials business was in private hands and the owners sought to maximise profits. Today Russia is happy to sell its wares at a deep discount in exchange for support in its ongoing showdown with the West. The companies remain nominally private as the Russian state is no longer capable of running a centrally planned economy of this sophistication, but the Kremlin retains tight control over what the companies can do through a system of licences.
At the same time, Russia has invested heavily in building the infrastructure to support this new reality. New pipelines headed east not west are under construction. And Russia has built a fleet of nuclear-powered tankers that traverse the Northern Sea Route (NSR) connecting European Russia to Asia with only a few weeks' travel time.
Fears that Russia would become a raw materials appendage to China transpired to be overblown as China’s own problems with the US maintained the need for good relations with the US and Russia’s own expanding relations with Africa, Southeast Asia and the Middle East. China has become an important source of technology for Russia and is increasingly able to replace the machines and electronics that Russia used to buy from Germany and the US.
But cut off from the latest technology and unable to develop this itself, Russia’s growth potential has been severely reduced, and it is slipping further and further behind the global economy, while China continues to power ahead. While the buffer of Russia’s almost limitless energy and commodity riches means this is a slow process, it is still inevitable.
This article is from bne IntelliNews’ monthly magazine that covers business, economics, finance and politics of the 30+ countries of New Europe.
Read it for free here
https://online.flipbuilder.com/myab/jxpq/
Sign up for free to receive the magazine by email each month here
Send any questions of enquires to sales@intelliNews.com