Russia’s economy has struggled over the last four years. Falling oil revenues, sanctions from western countries in response to the occupation of Crimea, Russia’s self-imposed ban on food imports, a sharp currency depreciation and large outflows of foreign capital have caused economic hardship. Greater cooperation between Russia and OPEC may see OPEC engage in more effective cartel behaviour, with higher oil prices as a result. For long-term growth and less economic volatility, Russia will need to diversify the economy away from the energy sector and seek to reapproach the West in the hope of easing sanctions. However, fiscal consolidation and limited fiscal space will make implanting policies that encourage diversification and long-term productivity growth difficult.
Russia’s dependence on oil and increasing Western sanctions has led to per capita income falling sharply since 2014, slipping to middle income status after reaching high income status a few years ago. There are also chronic levels of inequality with the top 10% of wealth holders controlling 81% of total household wealth.