The source of Russia’s global power derives not from sophisticated technology, an advanced service sector, or a cadre of entrepreneurs. Russia’s power is almost entirely backward-looking. Its geopolitical position rests on a base of prehistoric vegetation.
That vegetation, of course, has ended up as Russia’s reserves of oil, natural gas, and coal. About one-quarter of the country’s government revenues comes from fossil fuel sales. Those revenues ensure that Russia’s superpower status can’t be boiled down simply to its possession of nuclear weapons. Russia is not “Upper Volta with nukes” as the Soviet Union was famously dismissed. Petrodollars give it considerable geopolitical leverage as well as the means to wage war, most recently in Ukraine.
Consider how crudely Russia uses its crude. For some time, the dependency of certain European countries on Russian fuel imports—notably Hungary and Slovakia—has made it challenging for the European Union to forge consensus on anything related to Russia or Ukraine. Leadership change in Hungary has reduced, though not eliminated, this problem. The election of Peter Magyar has simultaneously gotten money flowing again from Brussels to Kyiv and oil flowing again, via the Druzhba pipeline, from Russia to Hungary.
It’s not just Eastern Europe. Although Europe as a whole has radically reduced imports over the last five years—from 45 percent of its gas imports to 19 percent and 27 percent of its oil to 3 percent—France, the Netherlands, and Belgium are still importing considerable amounts. Last year, the prime minister of Belgium blocked the use of Russian funds frozen in Brussels to help Ukraine. When money is blocked, follow the oil (also, don’t discount outright intimidation).
Russia, in other words, has used its energy exports to drive wedges between countries that might otherwise be allies.
These energy exports, subjected to sanctions and price caps, have also strengthened Russian ties with China and India, with those two countries combining to purchase 80 percent of Russian oil. Especially now, with the war in Iran and the U.S. blockade of the Strait of Hormuz, Russian energy beckons as a lifeline for many countries. Ukrainian attacks on Russian energy infrastructure have cut into the profits, but sales are still up.
Russia’s chief asset is also its chief weakness. Even before it launched its full-scale invasion of Ukraine in 2022, Russia depended a little too much on its own natural resources. Instead of investing in greater value-added production, Russia took the easier route of selling what it could extract from the ground, in the form of minerals and fossil fuels and timber. Like other countries caught in a “resource curse,” Russia lazily failed to diversity.
Windfall profits have also fueled corruption, from the Black Sea palaces of Gazprom officials to the money-laundering associated with Russia’s ghost fleet of aging tankers. Like Norway, a country that has singularly avoided the resource curse, Russia has a national wealth fund. But much of it has gone to pay for the war in Ukraine, as well as serving to “launder money, evade sanctions, and secure resources for both influence campaigns and military needs.” Russia ranks 157 out of 182 countries in the Transparency International index of corruption perceptions, lower than Iran and Congo.
It’s tempting to conclude that Russian politics is to blame for this lack of diversification. Vladimir Putin has cultivated a set of friendly oligarchs who have subordinated their economic decisions to the needs of the state. Diversification could disrupt this cozy relationship. The Russian economy has not been performing spectacularly—booming when commodity prices are up, plummeting when those prices drop—but it is good enough to sustain public support for the current government.
Let’s push this argument further.
Between the middle of the eighteenth and the middle of the nineteenth centuries, a succession of tsars continued to maintain serfdom in the face of rising protests and thwarted revolution. The Russian royals considered this unpaid labor to be integral to the Russian economy of the time. But as Marshall Berman argued in his pioneering study of modernism, All That Is Solid Melts into Air, keeping the serfs in bondage also ensured that Russian landlords and other wealthy individuals would not invest in the kind of modernization taking place in Western Europe and the United States. The tsars understood that such modernization would create pressures for political reform that might dislodge the tsars themselves. It wouldn’t be until 1861 that Tsar Alexander II freed the millions and millions of serfs in Russia.
Likewise, Vladimir Putin may well understand that modernizing the Russian economy away from reliance on natural resources would create other potential centers of power. Imagine a Russian Silicon Valley, for instance, wealthy enough to support rival political candidates and finance a wave of disruptive entrepreneurs. Despite his claims to the contrary, Putin is content with his country’s underdevelopment. Better that entrepreneurs like Pavel Durov of Telegram fame has relocated to Dubai—that’s one less independent-minded oligarch who could cause trouble at home.
Russia produces enough wealth to maintain a rickety social welfare system and sustain the war in Ukraine. Anything more might upend the pyramid of power. Underdevelopment keeps Putin in control.
Russian Economy Today
In the first two months of 2026, the Russian economy shrank compared to its performance last year. These figures prompted Putin to scold his underlings, demanding that they give him “detailed reports today on the current economic situation and on why the trajectory of macroeconomic indicators is currently falling short of expectations.” The lack of growth is a symptom of structural problems as are high interest rates and endemic inflation. Throw in a serious budget deficit and the Russian economy is on the precipice—or, at least, in the fast lane going in that direction.
Okay, these figures come from before the start of the Iran War, which has functioned like a Hail Mary pass from the Trump administration to Putin in the end zone. The increase in energy and commodity prices will inevitably restore growth to the Russian economy—but also forestall any serious changes that could address the underlying structural weaknesses.
The dividends from the Iran War might not even be enough to treat the symptoms. According to Thomas Nilsson, head of Sweden’s Military Intelligence and Security Service, oil prices would have to rise above $100 a barrel for more than a year to erase Russia’s budget deficit. Nilsson argues, moreover, that Russia is inflating its economic statistics to mask the damage that corruption, mismanagement, and wrong-headed policies have inflicted. There might be an element of wishful thinking here, since the Swedes are urging a more forceful policy of aiding Ukraine in the hopes that a tanking Russian economy will force a peace deal favorable to Kyiv.
Still, the war in Ukraine is certainly not making matters any easier for the Kremlin. In addition to the sheer cost of the campaign and the repairs to the infrastructure Ukraine has destroyed, the need for soldiers and the out-migration of the disgruntled have put serious pressure on the labor market. Even if the state pushed for diversification, it would be hard-pressed to find a workforce to train for the new jobs.
Last week, worried about the lack of growth, the central bank cut interest rates to 14.5 percent. Even in the face of high inflation, the money managers are desperate to pump money into the economy. The bankers acknowledge that the Iran War won’t save Russia. “A significant risk from external conditions is the situation in the Middle East,” the governor of the central, Elvira Nabiullina, said. “If the conflict drags on, the negative effects on the Russian economy will grow.” Veteran politician Gennady Zyuganov, the reliably nationalist head of the Communist Party, even warned the Duma of the risks of a 1917-type revolution if the government doesn’t improve the economy, and soon.
In other words, Putin’s reliance on the troika of fossil fuels, corruption, and autocracy to prevent a political challenge to his authority may end up producing the very revolt from below he fears the most.
Color Revolutions
To avoid the scenarios that produced political change in Russia’s neighbors—Ukraine, Georgia, Moldova—Putin has ruthlessly suppressed all potential political challenges. He has jailed opponents, had them assassinated, or forced them into exile. He closed down independent media. He passed a foreign agent law that effectively criminalized NGOs.
Opposition to the government is now expressed elliptically, much like the Soviet Union of old. Influencers complain about the shuttering of the Telegram messaging app and eroding living standards, but they also opine, to avoid charges of anti-Putinism, that maybe the supreme leader has been fed misinformation (a ludicrous notion that nevertheless has deep roots in Russian history).
Although his popularity has dipped to 65 percent, Putin is probably not worried about critical Instagram content. Economic discontent is another matter. Rising prices triggered the first Arab Spring protests in Tunisia. Anger over the cost of living and corruption led to the downfall of the Bulgarian government in December.
In the end, Russians can’t eat oil or gas or coal. The country has to provide jobs other than cannon fodder and coal miner. Underdevelopment suppresses the political demands associated with modernization—until it doesn’t. Perhaps Putin thinks that he can push the envelope long enough to capture the rest of the Donbas and deliver a “win” to the Russian people to offset all of their sacrifices. Ukraine—assisted by the rest of the anti-autocratic world—is betting everything that he can’t. War, even in this era of rapid-fire AI targeting, remains a waiting game.