Economy is only key to Russia's collapse

So far, unfortunately, the baseline scenario does not tell us that this will happen in the foreseeable future. But we hope so. And the key to this is in the economy.

"Why is the key in the economy? Because we need some people in Russia to hate others. This can best happen on the line of “fascists against Muslims.” There are already prerequisites."

Moreover, there are many of both in Russia. On the one hand, there are marches of thousands of fascists, as recently in St. Petersburg. On the other hand, there are Kadyrov's bearded men running around Moscow with assault rifles. However, these days the groups do not clash. They may hate each other, but there is no critical mass of hatred. There are not enough active fascists in Russia yet.

What creates hatred for people who are different from you? The crisis. An economic crisis. Hitler's rise occurred against the backdrop of unprecedented economic decline in Germany. People feel bad, and they start looking for someone to blame. And the easiest way to find the guilty is to blame the “other”. Back then it was the Jews. Now, after the Covid and several years of high inflation, there has been a surge in the popularity of the far right in Europe. And the hatred of migrants, which is actively fomented by Russian propaganda and its useful idiots like Elon Musk.

"It's not that there are significantly more migrants or that they have started to behave differently. No. It's people in Europe who have become worse off, whose living standards have fallen amid inflation, and there is a desire to find someone to blame. And here is the answer: migrants."

Fortunately, the decline in living standards is not comparable to the crisis that brought Hitler to power. That is why the level of support for fascists in Europe is still limited. Moreover, the poorer the region, the fewer migrants there are and the more the far right is favored there. East Germany is a typical example. Migrants don't really go there. And the far right is winning there. On statements about scary migrants. And where there are many migrants, for some reason the far right is not popular.

It's the same story in the United States. There are wealthy democratic states where migrants go. And there are poor Republican states where the authorities scare people with migrants. And migrants do not go there. And since economic growth depends on the available labor force, states with migrants show dynamic economic growth. And states without migrants are falling in living standards. And they continue to increase the degree of their own hatred of migrants. Because someone must be to blame for the decline in living standards. And then they tweet that it's migrants who can eat your cat.

"Thus, for hatred in Russia to mature to the level of “kill each other” from the current level of everyday chauvinism, an economic downturn is needed. It will be a necessary but not sufficient condition for a civil war in Russia."

How can this fall be provoked?

The quickest way is, of course, cheap oil. Then everything would be simple. But this requires a global financial crisis. Or at least a crisis in China. It is possible, but it is not yet a basic scenario.

The second scenario is the effect of sanctions and war. Russia is moving in this direction, but so far slowly. But it is moving. Last week, the Central Bank of Russia once again raised the discount rate to 19% (in Ukraine, meanwhile, it is 13%). They are trying to fight inflation, which is not yet galloping at all, but is already starting to get out of control against the backdrop of huge war-related costs. And it is inflation in Europe that has become an auxiliary factor in the growing popularity of local fascists. So Russia is moving in the right direction.

Will the Central Bank be able to stop this progress and bring inflation under control by clamping down on the economy and depriving it of money?

The paradox is that their actions to fight inflation do not affect the main cause of inflation. It is military spending that drives up prices. However, this affects the normal economy, which is not related to the war. Which is already suffering from sanctions. And, surprisingly, it is suffering more. Secondary sanctions from the 14th package proved to be effective and significantly crippled the Russian economy.

"Therefore, there is hope that the Central Bank will fail in its task. And Russia's slide into crisis will continue. This will motivate Putin to abandon ultimatums and agree to real negotiations. After all, as he spreads fascism across Europe, he is well aware of where it comes from. And what can threaten his power personally."

Will Putin have time to stop the war before the economic situation passes the point of no return and launches destabilizing scenarios inside Russia? Who knows. We do not know. And we cannot know. Just as we cannot predict whether the internal crisis in Russia will not be exacerbated by some black swan that will come from China and crash oil prices. And then there will be no question of any control.

But the economy is the only key to Russia's collapse. It is the economy that once brought down the USSR.

What is the lesson for Ukraine? To remember this vicious circle of poverty and hatred. Ukraine will need migrants after the war for economic growth. Ukraine's demographics are terrible. Without migrants, there will be no significant growth, no money for pensions and social security. But if we (Ukrainians - ed.) allow hatred and racism to dominate, then migrants will not come. We will become poorer. And hate migrants even more, whom most of the population has never even seen in person. This is definitely not a success story.

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About the author. Serhiy Fursa, investment expert, blogger.

The editors don't always share the opinions expressed by the authors of the blogs.