Russian State Falling Apart, Say Estonian Economists

Regularly tanking up in Russia can mean considerable savings in the household budget. Photo: RIA Novosti/Scanpix
4/11/2014 4:45 PM
Category: Economy

According to SEB private banking strategist Peeter Koppel, the Russian economy has many structural problems and is crumbling on many sides.

Koppel, and the economic adviser to Prime Minister Taavi Rõivas, Maris Lauri, told ERR radio today that the economic situation in Russia has had its impact on how it is acting in Ukraine.

Lauri said Russia's economy had deteriorated much quicker than many had predicted. Koppel said the goal of economic well-being has been replaced by a military narrative.

The downward spiral began in 2003 with the shutting down on Yukos, a petroleum company in Russia controlled by oligarchs, Koppel said. The government left the company a 20-billion-euro tax bill, which led to bankruptcy. The case led many prominent Russian businessmen to transfer funds out of the country, resulting in a lack of investments.

Lauri said 70 percent of Russia's GDP is oil and gas related. In Russia's trade with Estonia, for instance, crude resources are exported west and machinery, industrial products and food are imported to Russia - that, she said, was akin to developing nations trading with developed nations.

Besides the lack of added-value products, Russia's infrastructure is crumbling and the population is getting older, Koppel said.


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