media suggestion
Version 1.0/4.4, 2024-07-23
Important industries especially at risk
Aviation | Power plants | Oil production (in permafrost)
This is a proposal for media companies to create an international cooperation (for cost reduction and quality improvement) for continuous reporting and forcasting on an extremely important part of the Ukraine war which currently does not even get close to the appropriate attention: The question when the Russian economy will collapse. This seems to be the most important question as this will end the war (either by actually happening or by being broadly recognized in Russia as imminent), not some military change (because NATO is too afraid and Trump might be elected), the future lack of Russian military equipment (which will happen later) or another 100,000 dead Russians.
Since the beginning of the war in Ukraine the focus of public attention in the West has been on the military situation (both about what the West does for Ukraine and about the events in Ukraine). On the one hand that is not surprising in a war, on the other hand it seems that since the beginning nearly noone has expected a Russian defeat mainly by military means.
The armament of Ukraine by the West has been nearly completely defensive in nature. Even western artillery and main battle tanks are with few exceptions only used for stopping the Russian advance. It took NATO more than one year to provide missiles (Storm Shadow) with a longer range than HIMARS GMLRS; and even after 29 months into the war Ukraine has still not been given permission to use western weapons against targets in Russia (with few exceptions which just stop Russian offensives but do not really hurt Russia). Many observers have stated the assessment that the West was determined to prevent a Ukrainian defeat but not at all determined to enforce a military victory of Ukraine.
The "offensive action" (causing real, (in the long term) unbearable harm to Russia) of the West is not in the military but in the economical arena. The reasons are probably
that the risk of a military escalation between Russia and NATO as a result of economic sanctions is considered much lower than that from painful military measures
that it is easier and quicker to reach a concensus among many western countries for economic sanctions than for military support (which still is mainly the sum of independent national decisions)
Of course, new sanctions by the West are reported in the mainstream media; their results not so much, though. One obvious reason is that the results of the sanctions and other effects are much less obvious (both of a single one and of them altogether) and much less precisely determinable than those of some missile which levelled a building.
The most important questions for Ukraine and its allies (and one could argue even for Russia) are probably:
How much damage are the Ukrainians willing to endure before a large part of them prefers surrender or fleeing the country?
How much military and financial support are the western governments and (more important) voters willing to give to Ukraine?
When will the people in Ukraine and the West lose first their belief and later their hope that the situation will change for the better (considering what the West ist willing to do and what not)?
Their answers depend mainly on the question for how long the war will continue. Given that the prevailing assumption is that Russia will not be defeated militarily but will "surrender" only as a result of economic collapse or a political revolution (which would be the probable consequence of an economic breakdown), the question paid most attention to should be:
When will Russia's bankruptcy happen presumably?
Of course, this is not some company in a functioning legal system. The state of bankruptcy can probably not be determined precisely, not just as a prediction but even as an assessment of the present. So the better question(s) would be:
When will certain levels of Russia's bankruptcy start presumably?
In addition to the hugely important decisions / effects mentioned above, a good understanding of the remaining resilience of Russia's economy (which the western governments should have so this is more about political pressure from the public) would be helpful for the assessment of the urgency and relevance of additional economic measures (additional sanctions or better enforcement of existing ones), especially as an alternative to a military escalation.
Just imagine how different the situation would be if the consensus of the public opinion in Ukraine and in the western world was that Russia will probably reach the first phase of bankruptcy in 1.5 years, around the end of 2025, and in no case later than around the end of 2026.
As at the moment noone has a reliable idea when Russia's economy will start to severely break down, it is very difficult (up to the point of noone trying, at least publicly) to make assessments how much new economic effects would / will influence the development of the situation.
It is obviously not easy, maybe not even possible to answer these questions precisely. But for all practical political purposes precision is not necessary. Knowing reasonable upper limits (being one year after the probable date, not five years later) would be enough.
How to best approach this assessment is left to experts of the Russian economy, just some points:
The most important part of this estimate is probably the exhaustion of the national welfare fund.
Which part of the national welfare fund is easily accessible and when?
The reductions in the amount of sold oil and natural gas and the sales volume losses due to the price cap and discounts Russia has to give to mainly China and India.
Due to the very high key interest rate the Russian government is losing a huge, easily calculable amount of money to its real-estate subsidies.
The Russian national debt is rather low but the very high key interest rate makes this debt very expensive. This is just another effect increasing this debt and in contrast to the real-estate subsidies this financial damage is permanent i.e. it does not end with the war (maybe not even after lifting the sanctions) and cannot be cancelled with a political decision.
The increases in government spending (armament, increased salaries for soldiers and police).
The reduction in tax income as a result of the crashing economy.
A further depreciation of the Russian rouble.
With Chinese exporters taking over more and more industries (like the "Russian" cars which are 90% made and even assembled in China), more and more Russian industry is collapsing in a quite public way.
A serious probably long-term damage to the Russian economy is the collapse of their arms export. Due to both their lack of delivery reliability, the embarrassement of the performance of Russian weapons in the war, and the risk of political backlash from the West for buying weapons from Russia.
The general lack of available workers is driving wages and inflation.
Over many years Russia has attracted a lot of migrant workers. A relevant share of those has left Russia since the beginning of the war. Due to the worsening way they are treated it seems improbable that this trend will reverse during the war. Especially in combination with the anyway very low unemployment rate this has lead to a severe shortage in the workforce.
There will probably be a severe real-estate bubble which will be a big hit for Russia's economy, independent of all the other problems:
During the covid period the Russian government created a real-estate subsidies program for supporting the construction industry. They did not stop this when the covid problem was over. As mentioned above this program will create huge costs for Russia as long as the key interest rate is very high; at some point the Russian government will have to stop this program.
When this program stops then there will be hardly anyone left in Russia who can afford to build a house which may crash the construction industry.
The government may not even be able to continue to cover the real estate loan interest they have pledged to cover. This would quickly cause the housing bubble to burst as many house owners could not affort a 100% increase of their interest.
The government would probably be forced to reduce the wages of their employees (who are the majority of the users of this subsidies program), further increasing the financial strain and increasing the number of people who are forced to sell their real estate.
With many 100,000s of (well paid) Russians having left the country, many migrant workers gone, several 100,000s being killed or war invalids (who permanently have to live on lower income) the short-term real estate demand will noticably decrease.
The slow long-term population decrease which will be accelerated for several years by the severe crisis Russia is in now. Most people do not feel like having children during a crisis.
Many Russians try to avoid keeping a lot of their assets as money in Russian checking accounts. This is true both for Russian ruble and e.g. USD. They know how their country works and that noone can be sure what will happen to that money if the financial situation of the government and / or the banks deteriorates further.
Thus many Russians try to save their fortune by buying real estate, despite being aware that this behaviour has already caused a price hike.
So both the construction industry (including the industries which provide the necessary material (cement, steel, wood) and to the involved craftsmen) and the market for second-hand houses will be hit by
the decrease of physical demand due to the population decrease (less people needing housing and many people needing less housing than under normal circumstances due to the lack / delay of children)
the decrease of financial demand due to the lack of willingness (and ability) to pay for housing due to
at the upper end of the income distribution: many well paid people being gone
at the lower end of the income distribution: War invalids who do not (and never will) have a family may be unable to afford an apartment on their own and be forced to live in a shared apartment.
the almost-impossibility for the vast majority of people to get big loans (like for real estate) when the government has run out of money and the whole economy (including the banking system) is in a huge crisis
the sudden increase of supply of second-hand houses and freehold apartments (due to many owners being forced to sell after the end of the subsidies)
A relevant part of the upper middle class falling into non-managable debt (as a consequence of their real estate loan) would affect many parts of the economy due to the lack of income available for consumption.
These are probably the biggest effects. Some smaller ones may sum up to a relevant size and other relevant ones will appear later (see below).
The market price of crude oil varies over time, in both directions. But must other effects only worsen over time (i.e. the altogether economic damage is not just growing but growing at increasing speed):
The sanctions become more effective.
Those Russians who were most willing to participate in the war (including prisoners) have already joined the army. Thus the government has to offer more and more money to keep up the needed numbers of new soldiers.
The failures due to the lack of spare parts are increasing.
The oil production capacity is decreasing due to a lack of spare parts and know-how of western companies.
Trading even with China becomes more and more difficult (both paying and being paid).
The capacity of the Ukrainian armed forces to cause damage in Russia will only increase (while Russia's capacity to do something about it quickly decreases). Some of this damage is just a political decision of the NATO leaders (permission to use western missiles against targets in Russia) but Ukraine is just getting started with its drone mass production (and western nations are helping with that). So the considerable damage we have seen to Russian refineries and oil storages easily might increase a lot.
Obviously those problems which are already in effect should be part of the forecast. But both the probabilities of these problems going away or change in amount and the probabilities of additional problems appearing should (clearly, explicitly) be part of the forecasts. This includes the points from the previous section.
The big challange is, of course: Which of the current and future effects should be included in the calculation and how? It would make sense to not use the current value but the expected value instead. The hard part is obviously the assessment of those probabilities but that is what experts are for.
The result could be a collection of five dates (per bankruptcy level):
the safest assumption: the scenario in which Russia is lucky to the largest extent that seems worth considering (e.g. less than 5% probability that it will be even better)
a scenario in which Russia is lucky but to a much lesser, much more probable extent (less than 25% probability that it will be better than this)
the most probable scenario
a scenario in which Russia is unlucky to a more probable extent (less than 25% probability that it will be worse than this)
the scenario in which Russia is unlucky to the largest extent that seems worth considering (e.g. less than 5% probability that it will be even worse)
This should inherently make the estimates seem more credible to a large part of the audience than just a single estimate. In addition to that: Even if the expected value changes only slightly, it is important to know how bad the worst (considered) case scenario really is. Is it 20% wage reduction or the lack of reliable power supply with the whole country falling into chaos?
Some industries are either at especially high risk or both at high risk and of special economic or political importance so that it makes sense to cover them separately. These cases seem probable to not just generate input for the forecasts but regular reports in the media.
A large part of Eastern Russia (in area, not in population) is accessible only by plane. The lack of spare parts for Westen planes had a strong impact on Russian aviation. The number of available planes has decreased (some are used as source for spare parts for the flying planes), the number of air emergencies has multiplied, and the prices for flight tickets to some remote regions has increased more than 50%. This problem is only going to get worse.
This lack of aviation affordability may impact the supply situation (lack of available products, increased delivery costs; both effects being additional drivers of the already high inflation). The decrease of passenger numbers may result in a politically relevant feeling of being disconnected from Moscow.
Independent of the price situation: Being afraid for the technical safety when boarding a Russian plane is certainly not something that will increase the satisfaction with the Russian government.
The Russian power plants heavily rely on western companies for spare parts and know-how. This problem develops more slowly than the one in aviation but the effects will be much worse. Russian power plants have rarely been the targets of bombings so the Russian power grid still has reserves. But the increasing problems with power plants and thus the increased usage of the reserve capacity of other power plants are putting a higher strain on the wear parts. So at some point this grid problem will increase very quickly.
The devastating effects of a failing power grid on both the personal life, the economy, and the political situation can hardly be overestimated.
The Russian oil production also relies on western companies especially in those areas where oil production is difficult i.e. the permafrost regions. This may well explain the very strange (and very public) "voluntarily" oil production cuts (about 10%) since the beginning of the war. The potential huge financial problems for Russia from this area are obvious. The problem for Russia is not limited to a reduction of the oil sale volume; the other part of the problem is an increase in oil production costs which reduces the profits from oil sales (sales volume does not fund a war, only profit can do that).
A huge long term problem for Russia (which already appeared 30 years ago after the collapse of the Soviet Union) is that the reduction of oil production in permafrost areas has extreme short and long term effects. It can (kind of) freeze the pipelines, rendering them permanently unusable. Reducing the production of an oil well introduces the risk that it may take years or even decades to increase the production to the earlier level later.
The estimates should be published with a history of how they changed. The longer an estimate stays the same or between an upper and lower limit which are close to each other (or only gets worse for Russia over time) the more credible they should seem to the audience.
Every serious change in the history should be explained (e.g. the beginning of Ukraine going after the Russian refineries).
As mentioned before, the (internal) bankruptcy of a state is not as unambiguous as that of a company. So this should be handled in impact levels of different strength on the economy which will severely affect the war (via e.g. arms production and payment of soldiers) or the political stability (increasing poverty, inability to pay wages for government employees).
Russia's economic situation could easily be a lot worse than it currently is. The obvious reason is that many people outside Russia (including NATO countries) make quite a lot of money from helping Russia out. This is public knowledge and is reduced bit by bit (mainly by the US threatening secondary sanctions against those companies which seems to have an especially devastating effect of the trade between Russia and China).
For a comprehensive reporting on the current situation in Russia (and forecasts) these effects should be included. It should be pointed out that the situation is a result of these things happening but that they could stop any moment based on political decisions in the West. The expected values of important changes of this kind should be included in the forecasts.
Very obviously: not the western governments. They may have additional intelligence on the state of the Russian economy but they would most probably not be willing to publish it; or at least not any proof (if there even is any which would be usable for the public). The main problem is, though, that many people (even in the West) do not really trust their government. In addition the governments have their own goals, strategies, and approaches for Russia, Ukraine, and the war. The assessment of Russia's breakdown might interfere with these strategies. In addition most of the western governments try to communicate in a consistent way as a group so they have several reasons not to (always) tell the (whole) truth. They might even be interested in avoiding ruckus in the Russian population as noone knows the outcome of a revolution against the Putin regime.
So it is up to the media. But this would not be about being the best journalists, not much about being the first one to know something but about continuous hard work which would often be referred to (by the participating media and everyone else, too). So it would make sense that several international renowned media pool together for this. This would / should
reduce the cost a lot for every participating medium
lead to better results than if it was done by just one medium
valorise most articles and reports of the participating media about the war
increase the attention this information service gets by a lot (because it would be the main information source for this subject world-wide)
make this information more credible for Russians (which may be relevant even if this is not to be about trust but about being traceable, as few people would make the effort to check an information if they considered the source non-credible)
Not everyone who could be a valuable contributer to this data collection and economic assessments would have to be paid (at least not the regular amount). There are qualified people who are working on this anyway and might see a benefit for themselves in participating (even without creating a competition situation for the media):
There are people in academia doing quite detailed work on the Russian economy already.
There are Youtube channels which are specialized in reporting on the Russian economy.
People who are reporting on other aspects of the effects of the war on Russia might be willing to support this approach with providing access to their sources whicvh may happen to be able to provide valuable economic insights, too. They might not benefit from this news project directly but they may become more attractive to potential sources for their own reporting. And this support would require close to zero effort from them. The advantage for the suggested news project would be that these sources would already have been vetted (in a different context but that should not matter much).
It would be both very simple to do technically and quite effective in improving the mental association of the participating media with this project to not use the main name (project name.org) of the web site for the actual content but only for a short explanation of the project and a list of the participating media.
The (more or less) same content would be provided under different subdomains: media name.project name.org
Every media would reference their own version and could decide (on an article basis) whether to just mirror the original English content in their adjusted web site design or translate it (later). Some Russian (exile) media would probably volunteer for the Russian translation.
Of course, it should be the attitude of media that they report about the world and do not shape it. But information being available (at all; sooner or later; more or less reliably) does have effects on a war. This block is not about effects on the participating media (for those see the next heading on this level). And the comparison for the media not creating reality should be a world in which everyone has good access to all relevant news, presented in a factual way. An extreme example: If NATO (or rather: the governments of the most important NATO members) very publicly change their strategy (i.e. waiting for Russia to collapse) as a result of the public perception of Russia's situation having changed as a result of the reporting of this project then that would not be the medias' "fault" and not a reason not to do it.
Given that in a propaganda country the vast majority of the population can be assumed to underestimate the damage to their country (military losses, people and equipment; already occurred and (unstoppable) future economic damage; political limits (like the president being unable to visit most of the relevant countries of the world due to his ICC arrest warrant)), it seems natural that comprehensive reliable information should increase the potential for protests against the government.
The basis of effective sanctions is a good understanding how that economy works. And if those sanctions could be circumvented then also a good understanding of how and under which conditions that could be done.
Thus a better understanding of the current (or even future) situation of the economy in Russia could lead to ideas or determination for additional sanctions.
A better understanding of how the existing sanctions are circumvented or for what other reasons they do not have the previously expected effects may result in pressure by the West on some of Russia's remaining trading partners.
The work of this project could improve the quality of reports (which would have been published anyway) in two ways:
The reports could frequently refer to data on the project web site.
"Half-published" (available on the project web site but not linked there) content could be mentioned first in a report by the participating media.
This project would soon be well-known (in Russia, too) as an entity which handles economic information about Russia seriously and (if the participating media decide to handle it this way) pays attention to detail.
This should result in many people in Russia who have access to certain economic information to be willing to provide this information to the project. A large part of this information inflow could not be used as input for the project forecasts as it would have to be verified first. But it could be "useful background noise" for the forecasts (or rather future research of the project team).
A similar effect may (with some delay) result in additional sources for non-economic news, too.
Several effects
the research of the team
information provided by economic sources
information provided by non-economic sources
would provide a lot of opportunity for covering news before other media (i.e. create additional reports not just improve existing ones).
If a large part of the public (both consumers and non-consumers) of the participating media agree after some time (months, years) that this information collection and economic forecasts added a very important perspective to the news coverage of the war then this image gain will last for a long time after the war has ended.
Western politicians (especially those who are not currently in power and thus do not have access to secret service or non-public departmental information) may be much more interested in having regular background talks with those media who will probably be assumed to be sitting on a pile of relevant information about Russia which they have not published yet (for example due to a lack of proof).
Strictly speaking not an advantage of participating in this project but an important positive aspect: It seems it would make little sense for competing media to do something similar on their own:
It would take them weeks (with an international cooperation rather months) to get this done.
It would probably be more difficult to organize, more expensive, and of less quality as most the best options for cooperation (regular media, Youtube channels, scientists) would already be part of this project.
It would not generate much public interest beyond their own audience.
If the quality of that service (content or even just the web site) is noticably lower then many people (including their own audience) would ask the question what the purpose of that approach was. So the public net image effect might even be negative (compared to doing nothing).
There is a big risk that the first project has been preparing one or more extensions to the base service (see below) in the mean time. So that they could (literally on the day after the competing project has been launched) immediately announce the start of one of these extensions for a week later.
This project should generate a lot of trust by Russians who notice and follow it. This should improve the initial situation for the participating media to create media in Russia after Putin. The post-Putin Russia will need a lot of journalism.
This advantage would not be limited to Russians using these media but extend to the few suitable (and persecuted...) Russian journalists being willing to work for them.
The decisions for or against including the following parts would probably be made later, largely based on the experience how interested both the regular audience of the participating media and the general public are in the base project.
By definition not an effect which will add to the end of the war but which will occur after the end of the war (or rather: the war economy; but without it the war is not even sustainable for months) but it will have a huge effect on the Russian economy and thus deserves attention as being aware of this should severely impact the mood of the Russian population:
After the war all the well paid jobs in the armament industry and in the army will be gone. Most of the remainder of the Russian economy will be in ruins thus not providing alternative well paid jobs; if they provide jobs at all. Noone (both the Russians themselves and foreigners) invests in the economy of a mafia state if the development of this economy in the next five years is completely unknown.
So in addition to the drop of sales volume (and especially profit) from the export of natural resources over several years by then there will be
a collapse of government demand due to
the end of spending from the national welfare fund
a drop of tax revenues
additional permanent costs for the government resulting in spending cuts elsewhere
a collapse of consumer demand due to
the disappearance of a lot of well paid jobs
many well paid people having left the country (and not being motivated to return to a crashing economy)
very high inflation
a collapse of business demand due to
the demand collapse in the other two sectors
the collapse of investment
With the lack of the war as a public distraction the people will be "able to focus" on the lack of hope for the economic future of their country which may well become a self-reinforcing effect.
In addition to these internal problems the Russian economy will probably continue to suffer from the sanctions as long as Putin stays in power or even until Russia has been transformed into a real democracy, a country which is not a threat to its neighbours any more. Why should the sanctions be lifted as they hardly hurt the West but will bring down Russia in the end? Without a recovering economy Russia will not become a threat to anyone again.
Not all of Russia's current problems will go away with the end of the war. Some may even survive the lifting of the sanctions. These effects may be so severe that they should be considered separately. Examples:
The most relevant question may be whether the interest rate can go down (especially that for government bonds). If it does not go down to pre-war levels then the lack of sufficient government income may send Russia into a debt spiral.
Will the EU countries buy oil and natural gas from Russia again? Germany may consider it a matter of national security not to do that again (at least not in critically large amounts). For the same reason Germany may be unwilling to transfer natural gas from the pipieline from Russia to its neighbour countries as it does not matter much for the lack of gas problem who on the pipeline network is suffering; everyone gets the spike in electricity prices. So Russia may sell natural gas again but only in small amounts and at embarrassingly low prices.
Given that without a huge political change in Russia all profits (at least above a certain level) for Russia from trade with the EU are a direct threat to the NATO countries as these profits will lead to a rearmament of the Russian army and thus require higher NATO defense budgets, the EU may be very unwilling to restart trade with Russia before the end of the Putin regime. They may not call it sanctions any longer. They may allow sales to Russia but they may become quite creative in limiting Russia's economic prospects permanently. This will make investments in the Russian economy rather unattractive.
Some problems (in addition to the wide collapse of the armament industry) may even appear after the war (which may not be relevant/visible now) and severely impact Russia's possibilities of economic recovery. Examples:
Reparations will be huge (even including the about 300 billion USD seized by the West) or not be accepted by Ukraine and the West.
What will the West do if Russia refuses to pay reparations?
The West will demand compensation for the treatment of western companies which have left Russia. If Russia does not agree to that then further punishment may follow e.g. a ban on western investment in Russia.
With China being in a terrible (probably long-term) economic situation themselves they would not even be capable of providing the investment necessary for Russia. So there would be noone left who even could do that. Not even the Russians themselves will have much reason to invest in their own economy as that would be risky.
With Russia becoming a democratic country (broadly speaking...) the relations with China may well become much worse very quickly.
This category is similar to economy crash after the war. It seems that a lot of damage is currently caused by natural disasters or just normal effects as a result of a lack of maintenance. The worst example may be the flooding of more or less whole cities after the breach in a dyke.
Only a small part of this damage contributes to the initial collapse of the Russian economy (it may have a stronger effect on an uprising) because from the perspective of waging a war this damage can be ignored for quite a while. But someday it will have to be repaired.
For the Russian people this damage should be similarly frightening as the damage leading to the economic collapse as this is additional damage which can accumulate to a virtually unlimited amount before the collapse and will make it much worse for Russia to recover from the collapse. In this sense it does not really matter how the collapse it triggered; after that the Putin government is finished anyway. But it matters a lot how much additional damage has accumulated until then.
The lack of maintenance of and investment in company equipment (in addition to the supply chain problems) does not only affect the Russian economy internally. There are probably very few products left (which are not mainly based on natural resources or energy) which the Russian economy can offer competetively on the international market.
This problem increases over time as former customers change their supplier (and will need a good reason to revert this after a few years), the insight into foreign markets decreases, and the loss of a large amount of sales volume forces companies to adjust their capacity so that an attempt to recover these foreign markets after a few years would require different categories of investments (quality and quantity). There will probably not be any money left for doing that.
The end of the sanctions and payment and delivery problems may even be the death of a relevant part of the remaining Russian manufacturing as their uncompetitive products will be confronted in their home market with products which are both cheaper and better. A post-Putin regime might have severe problems with forcing the Russians to buy more expensive inferior products. And the western companies will not be very keen of investing in manufacturing in Russia (before a compensation agreement has been made).
A problem similar to the lack of maintenance and investment but probably even worse in its results and more difficult to fix is the lack of research and development capacity (quality and quantity) due to the emigration of skilled people. Why would they return after the war or after the end of the Putin regime? They probably feel not just oppressed by the government and authorities but also mistreated by the majority of the population. Why go back and save those people before a serious political change has happened? Why return to an economy in ruins and without prospect of quick recovery? It makes sense to assume that many of them will return only after the situation in Russia has become attractive for them (economically and politically). Especially as being outside Russia for a long time during such a war crime war will have made their view on Russia much worse. So the few people returning will keep the wage level high and thus contribute to the lack of competiteveness of the Russian economy.
In the area of high tech products (by Russian standards) the Russian economy will have lost years against the foreign competition. In that bad environment (lack of money, lack of skilled people, limited access to foreign technology, difficulty of research cooperation with foreign companies and universities) this may be just too much to catch up with in the foreseeable future.
With the strong political influence on universities, the quality decrease of the technological education at Russian universities and the foreseeable lack of attractive job opportunities, a large part of the STEM elite currently in Russian schools may already be considering emigration. So this problem will probably increase over years even if the West does not support it by making attractive offers to those Russians to leave the country.
The quite public consequences of the lack of western spare parts are embarrassing for the Russian government. And as embarrassement is one of the things they can least live with, Putin has made some announcements what Russia was going to develop on their own, especially aircraft. This will never result in anything usable because this would take much too long so that it will not be finished before the lifting of the sanctions and it would be much too expensive (tiny market and quantities). So effectively this is wasting resources for national alternatives which will be worthless after the end of the sanctions. This does not only burn tax money (which Russia does not have any spare any more) but also wastes the already strained technological resources. Wastes them today and reduces their future worth because the job experience of the last years of those people will be largely worthless (having been working on much inferior products which will never be built).
An interesting extension of this project which would not require much effort would be to have a discussion area which would be publicly readable but writable only for known experts (who may comment there anonomously if they prefer to; this may be important for experts in Russia).
The high quality of this project and its public effect would attract those people.
At some point in the future there will be a free and democratic Russian society. On the one hand the crimes of the current Russian government are, of course, orders of magnitude below the guilt other European countries haven taken on in modern history. On the other hand this seems to be the first time in human history that the crimes of a government were that public, known without detail to just everyone and in detail accessible to everyone. And nonetheless the Russins have re-elected a war criminal for president, tolerated their joke elections and volunteered to destroy the future of both their economy and their demographics and probably that of Russia's statehood in its current form (secession of huge areas). What does that tell about the Russians as a people?
This will very seriously and over decades raise the question how this could happen. And like in the past elsewhere most people will claim that the government lied to them or whatever. So it will be important to have a good documentation about what was known (how easily and reliably) at what time. Most of these questions will be political but for the "You saw the reality in front of your very eyes and did not care"-effect the economic part will be important, too.
Much of this information will be easily available within this project just as a side-effect. So it would be very little additional effort to make this an additional public service. In this case cooperations with historians and political scientists might be more suitable than with economists.
As already mentioned, a political documentation will be much more important for the future historical reappraisal of this time in Russia. This would be outside the scope of the economic base project but maybe the prominence of this project and approach may help to find and bring together other people who would do an analogical project for the political documentation (there are certainly already people doing that; this may just make their work easier and much more prominent).
Very loosely related to the collapse of the Russian economy but of similar importance to the world: The future of China's economy seems very unclear, to put it very, very mildly. In contrast to the Russia case this is not something the West is waiting for but it seems very important for the West to keep an eye on that (both for economic preparations and political decisions) for much longer than the situation in Russia. So it might be interesting to start a similar project about China later. That would probably be less about forecasts (enough people have been doing this and the exact results are less relevant than in the Russia case) and more about documentation and raising awareness.
As people involved with Russia may not be comprehensively aware of the situation in China, a summary of the most important problems:
The (closely) second most important part of the Chinese economy is crashing, to a devastating extent and probably for many years. Due to a housing bubble and the lack of a suitable system for pension provision, an insane amount of real estate has been built over the last 20 years.
As apartments were bought as an investment it did not matter whether the buyers could affort them. To make this even more incredible it was common in China to take out a loan and pay the whole price for the apartment upfront. Together with completely irresponsible behaviour of both public and private real estate developers this led to the situation that buyers have a full loan on an apartment which they must serve but the developers have not even started to build it and have run out of money to build it. With the crash of the real estate market a large amount of apartment owners now have a negative net worth: The remaining loan is higher than what they could sell the apartment for (if they can sell it at all).
In the notoriously expensive cities London and Paris the ration of the median real estate sale to the median income is below 15. In the four largest Chinese cities it was above 40 before the market crash.
The lower estimates of the number of empty newly built apartments in China are above 60 million. There are whole newly built ghost towns (for several 100,000 people) in China. The quality of much of the Chinese buildings is a joke anyway but the wear and tear of uninhabited buildings is much higher so their value is depreciating rapidly.
Very few people in China have a good reason now (and for many years to come) to buy a house or apartment which has not been built yet. Existing apartments cannot even be sold at huge discounts so having a new one built would be burning money (unless the cost of houses not yet built decreases to a small fraction of the value before the crash).
The government desparation is so high that authorities and state-owned companies are now urging people with savings or high income to buy real estate.
As a consequence of real estate owners with negative net asset worth stopping their loan payments the Chinese banking system is in severe danger of a crisis. This has already led to small limits for daily withdrawals.
The banking crisis is on a much lower level than it would be in a free country as it is quite difficult to move money out of China. Many wealthy Chinese are trying to leave the country and accept severe losses when taking their fortune with them (in unofficial ways).
The burst of the housing bubble has caused a private debt crisis and has brought the construction industry and its suppliers close to a standstill. Without any prospect of improvement in the foreseeable future.
Due to the large-scale destruction of real estate value most of those people who are not in (net) debt any more have lost most of their pension provisions so they will feel the need to save more in the future, thus worsening China's already severe problem with too little domestic demand.
The bursting housing bubble does not only affect residential areas. Physical stores are suffering greatly, even supermarkets. There are whole shopping malls and shopping streets effectively empty. One of the reasons for that is the move to online shopping (driven by the need to save money).
The really strange legal situation in China is that the local governments are prohibited from both taking on regular loans and using tax money for servicing their irregular loans. The Chinese "solution" for this problem is called local government financing vehicle (LGFV). The more or less only income the local governments can use for repaying the loans which the LGFV have taken on for them is from land sales. This does not work any more is the real estate market is crashing. Noone needs land for new construction and especially noone is willing to pay much for it. The amount of LGFV debt is between $7 trillion and $11 trillion.
A high GDP growth is politically very important to the Chinese government. This led to huge government investments in infrastructure for many years. Unfortunately the main goal of this investment was to create construction work and so boost the GDP. Rarely was the economic meaningfulness of the project a relevant criterion. So in effect the government has just burnt a huge amount of money. One very prominent example for this is the high speed railway network which is nice to look at but creates huge losses. Many Chinese avoid the high speed trains due to the higher ticket prices.
As a result of this the national debt has increased very quickly (from 8.3B USD in 2019 to 14.4B USD in 2023, from 34% of GDP in 2010 to 84% of GDP in 2023). Of course, with huge problems in the economy it is very difficult to even decrease the growth of this debt.
The largest sector of the Chinese economy, manufacturing, has severe problems, too (not on the same level as real estate, though).
Several reasons have led to a big reduction in orders and the large-scale migration of manufacturing to the neighbour countries:
The derisking/decoupling decisions of western companies (after the covid supply chain shock) lead to large amounts of manufacturing capacity being moved to other countries in that area.
The Chinese wage average being about four times of other countries in that area leads to large amounts of manufacturing capacity being moved there.
The youth unemployment problem has become so large (despite the kind of official tweaking of the numbers) that the Chinese government has stopped publishing those numbers some months ago.
The already existing trade restrictions with the US and the risk of all out trade wars with the US and the EU make it very unattractive to invest in the Chinese economy (in addition to its shocking state and prospects).
According to Beijing's State Administration of Foreign Exchange inbound investment from foreign sources dropped by 90% from 2021 to $33 billion for 2023, the lowest level since 1993.
The leading countries in semidonductor technology (the US, South Korea, and the Netherlands) have agreed to stop supplying China with equipment for the manufacturing of high-end semidonductors and even the chips themselves. This will be a permanent heavy blow (or rather: just end) to the attempts of the Chinese economy to provide leading edge products and services (e.g. that is the end of AI in China).
The permanent talk about war with Taiwan is just another reason for avoiding China altogether (even though this is quite improbable to happen, for military and economic reasons). But can the Chinese government stop this nonsense propaganda? Probably not as this would be a huge loss of face – which is about the last thing that seems acceptable to an autocratic government.
China has a huge demographic problem. As a result of
the 35 year long one-child policy (until 2015)
the very quick urbanisation
the high cost of children in cities
changed social norms and trends
and now (and for many years) the crashing economy
China now has one of the most quickly aging populations of the world. In 2020 the ratio of retirees to workers was 1:5. For 2050 it is expected to increase to worse than 1:2. The only accessible measure for the government to improve this is a change of the retirement age (which is currently among the lowest in the world).
Even Chinese sources have estimated (before the covid shock!) that the Chinese retirement fund may run out around 2035.
The central and local governments (and many companies) have reduced the wages of soldiers and public servants which can be expected to have severe impact on the people's capability and willingness to spend money, further exacerbating the existing problems.
The Belt and Road Initiative is becoming an economic disaster for China, mainly due to covid (i.e. the economic problems this caused in the partner countries) and the Ukraine war. It has accumulated more than a trillion dollars in debt to China, and a large part of this debt is at high risk.
All these problems are only going to get worse. And China does not control most of the factors. There are even severe risks outside China. It is the world's largest importer of food and energy. A spike in food prices (e.g. as a result of a collapsing economy in Russia, one of the world's biggest exporters of food) or a democratic post-Putin Russia which refuses to sell oil and natural gas at those low prices to China could quickly throw the country into existential problems.