2. Scenario 2
Curse of Resources
Climate Change
Increased amount of arable land; increasing the value of an existing renewable natural resource; which will be an additional source of FDI
Decreased cost of operating in remote northeastern areas
Improved sea access to the arctic
Access to arctic resources
Increased value of an existing resource: water
Climate change has a dramatic negative effect on India, Pakistan, Afghanistan, China, Persian Gulf
Governance
No real democratization.
Centralized authoritarian control from moscow. Medvedev-Putin remain in control for further 6 years, after which Putin retires and Medvedev continues with a hand-picked successor.
Mixing of business and politics continues. Oligarch class controls majority of resources through companies with government ownership stake.
Current model of governance is effective at maintaining control of resources and leveraging their strategic value.
Current model does not turn off business partners from the Gulf or Asia
Oil
Prices remain relatively high on average, but are extremely volatile. Supply disruptions and growing demand result in a number of boom bust cycles taking place within a space of ten years.
The government is incapable of effective disciplined long-term management of resource revenues.
Demographics
Government's policy interventions (tax breaks, subsidies, etc) are able to stop population decline but unable to promote population growth.
Health does not improve. Although life expectancy bottoms out.
Quality of education declines.
Labour shortage problems arise, despite chronic unemployment. Lack of an effective social safety net sees poverty increase despite a growing economy.
Foreign workers are imported to work agricultural land, mines and forestry. Originally for "dirty jobs" and then increasingly for skilled jobs.
Due to Russia's inability to attract labour/immigrants it is dependent on foreign partners to supply labour. Most foreign workers live in "company towns" near mines, farms, etc.
Due to incidences of racially/ethnically motivated crimes, foreign workers are rarely seen in urban areas. There is no mixing with the locals.
Hate crimes, incidents of racism and neo-nazism, together with continued human rights abuses in the Caucasus further erode Russia's ability to attract foreigners.
Infrastructure
Infrastructure directly related to resources (highways, railways, power grid, ports) receive needed attention, however, russian productivity/efficiency remains well below that of othe G-8 countries. IT, Health and education infrastructure languishes.
Technology
Due to lack of investment in post-secondary education, lack of policy support for entrepreneurship, lack of transparency, corruption, lack of links between educational institutions and industry, and between Russian educational institutions and foreign institutions, Russian technology ceases to be competitive.
Russia becomes increasingly dependent of foreign partners for technology to implement projects (e.g. Build a refinery, upgrade a smelter).
Military
The caucasus remains a flashpoint. The region is simply too important as an avenue for the export of Russian oil and gas. Despite the expense, loss of life, human rights abuses, and the damage to its international reputation, Russia is not willing to give up control.
Summary
Russia continues to have an abundance of natural resources. In fact it has more resources than at the turn of the millenium because its water and agricultural resources have increased invalue, extraction of its resources becomes easier because winters are milder, and because its arctic territories are opened up to exploration and exploitation. However Russia has not addressed its weaknesses, which are serious. Its population is still shrinking, ageing, and unhealthy, its labour force is unproductive, its industries are not competitive, and its technology is antiquated. Russia has not even been able to derive the maximum benefit from its resources because it has invested in a short-sighted manner primarily in the oil, gas and mining sectors, without corresponding investment in technology, education, health and infrastructure that would make it more competitive. As a result, Russia is unable to extract its own resources without the support of international commercial partners, who will provide the necessary labour, capital and technology. These deficiencies effectively reduce the profit that Russia can derive from its resources (i.e. partners that provide capital, labour and technology will not also pay an exorbitant price for the resource itself). This means that Russia's bargaining power is limited and, rather than selling its resources to the highest bidder, will have to grow accustomed to accepting the terms of the market. Foreign control (ownership?) of Russia's resources will thus increase, (turning Russia in a global commons???).