Former Finance Minister Alexei Kudrin warns that Russia needs to implement structural reforms to save the economy, according to CNBC. He suggests such measures as infrastructure spending, pension reform and decentralization of the budget as useful alternatives that could lead to growth. Kudrin also expressed concern that politicians refuse to take such drastic steps as 2018 elections draw near. The oil market dropped to its lowest price since 2009 this week.
The Russian economy has sustained damage from multiple angles, as the country still suffers from sanctions over geopolitical standoffs, combined with low oil prices that stall production. OPEC decided to keep oil production at current levels, which does not bode well for a country that needs oil prices to remain high to sustain the economy.
The Saudis remain determined to place overseas competitors in a precarious position—especially the Russians. The Russians and the Kingdom have nurtured animosity geopolitically and economically, and the royal family delights to see Russia's energy sector in peril.
Oil will continue represent a cash cow for Russia, but elites are beginning to recognize other lucrative sectors of the economy. For instance, Russian CEO Mikhail Shamolin points to the improved agricultural sector, where demand and local growth gain traction. Further, he would like to see decentralization take place within certain industries, most notably the privatization of various sectors.
Criticism notwithstanding, Shamolin believes officials are doing more to help local businesses prosper, including local economies as a whole. The problem remains that the changes taking place will not prove effective enough to get Russia out of its current slump in the short-term, and long-term structural reforms could take years to complete.
Outside powers hope to use sanctions to foster an uprising against President Vladimir Putin, but this has had an opposite effect. According to recent polling, Putin's approval numbers hover in the 90 percent range. Russians are hurting over the poor state of the economy, but strong patriotism outweighs any form of discomfort, and many feel as though the international community—the West in particular—have taken stands against Russia.
However, Putin cannot ride on the coattails of nationalism for too long, as depressed wages and pensions plague an increasingly shrinking middle class. Russia's middle class could shrink from 20 percent over the past 15 years to 15 percent because of the economic fallout.
Currently, Russian authorities do not have sound solutions that help the economy adapt to sanctions and diversify the economy away from oil, and new ideas will be necessary as low-priced oil and sanctions will not go away anytime soon.