Russia’s Dark History—and Bleak Future

Even as Russian troops amassed along the Ukraine border late last fall, many experts and commentators suggested it was all a feint, that Russia would never invade Ukraine. How did they get it so wrong? They failed to take into account Russia’s history—and its future. 

Let’s start with the history. Russia’s is quite tragic, and filled with regrettable decisions at every pivotal turn that has stunted the country’s political and economic development. 

Scorched Earth Tactics

By burning every area it had to leave while retreating when Nazi Germany invaded, the Soviet Union ensured that no supplies would fall into the hands of the Nazis. It is easy to be blinded by the strategic brilliance of this strategy and ignore what it meant to the average Soviet citizen at the time: Civilians left behind enemy lines starved and froze to death as all food silos were destroyed by their own country’s soldiers, on orders from their own country’s leaders. Their homes were burned by the same soldiers. Much has been said about how Nazi Germany failed to account for the harsh Russian winter, but thanks to the scorched earth strategy, millions of ordinary Russians had no shelter from that very same winter. 

While the tactic is widely associated with the Soviet Union, Russia has used it extensively and routinely for centuries. As far back as the early 1700s, Russia defeated the Swedish empire using the scorched earth strategy. Ironically, the decisive battle in that war took place in Poltava in what today is Ukraine. Carolus Rex, then-King of Sweden, had easily defeated his prior enemies Denmark-Norway, Lithuania, Poland and Saxony, using a strategy eerily reminiscent of the blitzkrieg used centuries later by Nazi Germany. Unfortunately, this blitzkrieg proved ineffective as supply lines were strained and reinforcements unable to keep up with the rapid military advance. The scorched earth strategy allowed the Russian empire to starve and freeze the Swedish army to death, without having to meet them in the open field. Those who survived the winter made a desperate attack at the fortress of Poltava, and were crushed by the Russian army that had long since gathered there, waiting for the Swedes to walk into the trap. While a military success, the story of the scorched earth strategy also demonstrates how, while ordinary citizens in general had few rights in Europe at the time, no country ever viewed its people as expendable quite like Russia did. Countless Russians would die just to prevent any resources or shelters from falling into Swedish hands.

Nine years before Poltava, Sweden had won an overwhelming victory at Narva (present-day Estonia), and 20,000 Russian soldiers had been taken prisoner. Sweden immediately released these men after disarming them, but this mercy would not be returned. The 2,800 Swedes who surrendered to the Russians at Poltava were instead enslaved, many of them sent to Siberia. Deportation to Siberia is another punishment that, while associated with the Soviet Union and its gulags, actually far predates it. 

Serfdom and Revolution

Russia retained its system of serfdom until 1861. For perspective, consider that at the time when the United States was gearing up to finally liberate its ethnic minority from slavery, Russia was just getting around to emancipating its ethnic majority. A third of Russians were outright serfs at the time of emancipation, and even most non-serf peasants had few rights. By the year 1900, every country in Europe had a parliament, with monarchies either abolished or their powers greatly restricted. Universal suffrage had at that point been introduced in 11 European countries. Meanwhile in Russia, the promising step of serfdom abolition had proven to be an exception from the rule, and no democratic reforms took place over the next few decades. The czar still ruled as an absolute dictator by supposed divine authority as late as 1905, when the first failed Russian revolution forced him to enact some mostly symbolic reforms, including the formation of a strictly advisory parliament (the Duma).

When most people speak of the Russian revolution, they refer to the revolution in 1917 that installed the communist regime. That, however, was the third such revolution, wars that gradually became more extreme. The first, in 1905, sought only basic human rights and an end to absolute czarist rule, whereas the second revolution in early 1917 sought to depose the czar and introduce civil rights such as freedom of speech and press and free elections. With Russia having no real democratic or parliamentary tradition, the provisional government that formed after the second revolution failed quickly as the factions that made it up were unable to work together with the czar having abdicated. This breakdown in government led to the third revolution, eight months after the second, which is when the communists seized power. 

Russia’s political system thus went from czarist autocracy to Bolshevik proletarian dictatorship, with a mere eight-month gap during which the country was nominally a democracy. Its economy went from feudalism to communism without ever truly being a normal market economy. Russia’s history is a unique tragedy, the story of a country that never evolved beyond the philosophy of might makes right. 

After the dissolution of the Soviet Union, Western analysts believed that they had witnessed the end of history and resolved to treat Russia as an equal. Consequently, Western nations sent hundreds of billions of dollars in foreign aid to help the ailing Russian federation. They believed that with enough foreign aid, and by accepting the country as an equal into the community of nations, Russia would soon be a democracy. 

This was, to put it mildly, naïve. It displayed an ignorance of Russia’s unique history, and in particular its centuries-long ability to live next to the West and even trade with the West without ever becoming like the West. Russia was never going to become a democracy after communism failed. Once it became obvious that communism didn’t work, the Russian mindset defaulted back to czardom as the next logical option for governance.

The Economy

The Russian economy has now been more or less crippled by sanctions resulting from its invasion of Ukraine. It is on this basis that many analysts refer to the invasion as wholly irrational, since even a successful occupation would not automatically bring an end to sanctions. 

This, however, ignores some crucial facts about the Russian economy. Most of all, that it is completely unsustainable. Russia’s exports are oil and products made from oil, mostly petroleum, and natural gas. Both are non-renewable resources. Russia’s cost of production is already far higher than that of the Middle East, and both oil and natural gas become more expensive to extract the less you have of it. Russia’s greatest concern in that area is that the world is moving away from non-renewable resources. 

In a normal scenario, Russia would have invested its oil and gas money into transitioning its economy away from fossil fuels. It would have built a sovereign wealth fund similar to Norway’s, and provided subsidies and/or tax deductions to non-oil companies, especially in the creative knowledge economy, to help them grow. 

That will never happen in Russia. In a viral thread well worth reading, Kamil Galeev explained why. The gist of it is that the Russian economy can be roughly divided into three circles. The first is oil and gas. These are extractive businesses, and very easy to run. Putin’s personal friends control these, and the fact that they are incompetent and could never make it as businessmen in a free market doesn’t matter. Galeev compares Russia’s energy industry to how cartels in Mexico have come to control the avocado trade. If the cartels were to try to dominate a business like IT consulting, they would be unable to turn a profit since these kinds of businesses require specialized skills. A mafia is a simple thing, incapable of administering anything complex without ruining it. Sure, the cartel can hire nerds, but eventually, since the nerds are needed and the cartel is not, the balance of power would shift in favor of the nerds, and eventually the cartel would no longer be a cartel but a legitimate business. The avocado trade, like oil, is just about extracting resources; you don’t even need to refine these resources before selling them.

The second circle is metallurgy, which is another significant portion of Russia’s exports. Russian mining is largely controlled by the original, pre-Putin oligarchs from the 1990s. These people are not powerless, but they rank lower in the hierarchy. Metallurgy is too complicated for Putin’s friends, and really, it is too complicated for the oligarchs as well. As old deposits dry up without new deposits being found and developed, the industry is slowly dying. Fortunately for the oligarchs, metallurgy is similar to oil and gas in that the products are so valuable that you can mismanage their extraction and production for a very long time and still make a profit. But not forever.

The third circle is machinery. This circle is too complicated for both Putin’s friends and the oligarchs, and so it is left to be run by actual, competent people. The same goes of course for any other, smaller industry such as IT. Now you may think that even if the oil, gas and mining industries are mismanaged, that Russia will be able to fall back on those industries that are subject to (relatively) free competition and where experts run the show.

That is not what is going to happen. 

The problem is that if Russia were to have a truly successful industry that was not oil, gas or metallurgy, this would threaten the power of the old guard. Rather than let this hypothetical industry flourish and its entrepreneurs to rise to wealth and, inevitably, political power, they would sabotage it to ensure the status quo remained intact. This also explains a lot of Russia’s dependency on Western-made machines and parts: From the point of view of the old guard, it is better that money flow out of Russia and enrich Western exporters, rather than that the money enrich Russian engineers and entrepreneurs. 

Galeev further claims that a rising middle class is not a good thing as far as Putin and his friends and oligarchs are concerned, since the middle class is the most prone to consume Western media and desire a Western-style government. This is partially true. However, China has a growing middle class and the regime has done nothing to prevent this from happening—quite the opposite—because it knows that its ability to stay in power to a great extent relies on its ability to create economic growth. People, and not just Russians and Chinese, have an unfortunate tendency to tolerate totalitarianism as long as their economic situation keeps improving. The day the growth stops, the regime will either have to reform, or crack down even harder on dissent in order to stay in power. Often, it won’t be enough. 

A lot of Putin’s popularity stems from Russians, particularly older Russians, comparing his reign to the chaotic 1990s, which to many of them brought the worst of both worlds: There were food shortages, just like during communism. But now, no one was guaranteed a job anymore and unemployment ran high. If Putin’s regime brought back this “worst of both worlds” scenario, his popularity would undoubtedly drop. 

The only reason Putin would want for the middle class not to expand is if he knows that the country’s wealth is highly illusory. Within one or two decades most if not all of those who would now rise to become part of the middle class would be pushed back down in the economic crisis that followed the collapse of the country’s main exporting sectors. The newly middle class would not be happy to return to their former poverty. Russia’s poor may be too weak to stage a rebellion, but a middle class that realizes it is soon going to be returned to poverty might just spark a revolt. 

Finally, one thing Galeev does not bring up is Russia’s demographic winter. Birth rates have been declining for decades,  so Russia does not have a lot of young people. While there was an uptick in the number of births in the country’s post-Cold war heyday (roughly between 2008 and 2016), birth rates have crept back down, possibly as a consequence of sanctions causing Russians to worry about the future and postpone family-making. More Russians die each year than are born, and this has been the case for decades. Only 9.54 percent of Russia’s population is between the ages of 15 and24, compared to 12.91 percent in the U.S. and 11.49 percent in the United Kingdom. From a military perspective this is troubling as this is the main age group that would normally be conscripted and sent off to fight, and with so few young people available, Russia’s ability to sustain a long-term war with heavy casualties is also limited.

The truth is that even if Russia could continue to grow, most of that growth would have to be used to care for the country’s aging population. There are countries with worse population pyramids, but they tend to be developed countries with enough resources to care for the elderly, even as the young become a smaller share of the population. That does not describe Russia. Even if one could find a way to immediately boost birth rates, this would actually represent an additional expense for the 15 to 20 years it would take for children born today to grow up and join the workforce, time during which they would need education, pediatric health care, and other child-related services. Normally a country may be able to rely on immigration, but this was never a realistic prospect for a low-wage economy like Russia, and if it ever were possible, the invasion of Ukraine most definitely ensured that Russia will be unable to attract large numbers of immigrants, especially relative to the number of emigrants now leaving the country.

To understand why Russia invaded Ukraine, one needs to understand that the country has been moving toward an economic collapse for a long time, with its key industries mismanaged, its creative and manufacturing sectors sabotaged, and its demographic winter choking the growth of its country and middle class. It is a well-established behavioral economic phenomenon that human beings take far greater risks when we are “in the red,” compared to when we are doing well. When we are losing, we feel better about taking risks that may possibly put us in the black, whereas when we are winning, we tend to guard our profits. Russia has been in the red for quite some time.

What then would the invasion of Ukraine do to change that? Suppose that Russia had been able to overwhelm Ukraine and annex the country within a few days or weeks. Russia would then have incorporated a territory with an economy far more diversified than its own. With Ukraine being the breadbasket of the world, Russia’s own food supply chain would have been secured no matter what happened to the rest of the country’s economy. This is crucial as a starving population is a certain recipe for revolution. A regime that can at the very least keep its people from starving stands a better chance of surviving. 

At the same time, it is very much unclear whether severe sanctions would have been imposed, had Russia won a quick decisive victory. Again, Ukraine is not for nothing referred to as the breadbasket of the world, and with some of the most fertile lands on the planet, Ukraine is an important piece in global food supply chains, especially of corn and wheat. Had Russia been successful, they could have threatened to stop Ukrainian food exports if sanctions were imposed, and this may well have worked.

Now, Russia’s future is truly dark, and the war and subsequent sanctions will only speed up its already impending collapse.