Read Part 2 here (civil war, Ukraine, new arms race).

Russia’s economy is going the way of suicide and the most obvious model of the Russian state in the near future is based on the rule of criminality. The country is walking into a period of darkness that would last till the end of this century, according to an economist and scholar who was a designer of Russian economic reforms in the 1990s. 

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On sanctions’ impact

Speaking in an interview for the Popular Politics, an independent YouTube channel, Igor Lipsits, doctor of economics, author, and a co-founder of the Higher Economic School in Moscow, says the main reason for his pessimistic outlook is the fact that the country no longer generates added value – because of the war and economic sanctions. 

“Russian economy is stalling. Industrial output stopped growing seven months ago. Military multiplicator or defense orders helped it grow until last June but civilian development degrades,” the scholar said.

Redistribution of existing assets seems one of the two options for Vladimir Putin’s regime to buy the loyalty of the new Russian nobility – so-called “siloviki” (senior military and security chiefs) and “chinovniki” (senior and middle administrative apparatus).

This process has already started and the government calls it “nationalization”.

The other option is robbing the population on occupied Ukrainian territories.

“Since no new value is being generated, the elites will struggle to grab properties from others. The country will return to the 1990s – murders, assassinations, frauds, schemes, banditry. […] If you look at Russian cemeteries now – with large avenues among luxury gravestones of former gangsters – these places are going to expand again. Now it’s the state behind this process due to the wave of nationalization. Property seizure will become commonplace very soon as the Kremlin needs a new class of nobility of feudal model – property in return for loyalty,” Lipsits stated.

A report by Novaya Gazeta describes the new “privatization” process in great details.

On (lack of) drivers for change

Asked what can be done to alleviate the situation, he feared that the process of Russia’s degradation cannot be reversed as the country lacks a force to drive for change: “The elites don’t want and the bottom people can’t.”

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Siloviki and chinovniki are the strongest and most homogenous forces that can master the future of Russia and they are not interested in change or in sharing their privileges with other groups. On the other hand, the ruling class does not need highly qualified specialists – more educated – for the fear of losing access to resources.

“All they want is to continue milking the public budget for their personal needs,” he added.

“I was asked once to elaborate an academic curriculum on economics for members of our parliament [State Duma] and teach them some basics about economy. When I was done, they told me that not one elected legislator signed up for the course,” Lipsits gave an example.

There’s a layer of younger generation, but it’s thin and their best choice is either to flee the country or to join future gangs as riflemen since opportunities are very limited and the social lifting mechanism is broken in Russia, the economist emphasized.

To be continued.

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