Barrels and bullets: The geostrategic significance of Russia’s oil and gas exports

In 1953, US President Dwight D. Eisenhower warned about the hidden costs of what he was to later describe as the “military-industrial complex.” Ike said: “We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.” The leaders of today’s Russia face a twenty-first-century version of this dilemma, weighing the trade-off between spending on guns or butter. Russia’s own defense-industrial complex (known as the oboronnyi-promyshlennyi kompleks, or OPK) has been the recipient of billions of dollars in the past few years, as the state ordered new weapons such as the T-50 PAK-FA fifth-generation fighter aircraft, the Armata main battle tank, new nuclear-powered submarines, and strategic missiles. Should they continue the costly effort to remake their military into one of the most numerous and sophisticated forces in the world? Or should Russia’s leaders instead focus their efforts on investing in health, education, infrastructure, and other areas to help build a more dynamic and competitive economy? The answer to this question will be partially shaped by how much money Russia’s leaders will have to spend; with the crash in the value of oil exports – the unstable pillar of this Eurasian petro-state – what funds can they expect to draw upon? Decision-makers in the Kremlin will also be influenced by their perception of whether Russia faces a hostile geopolitical environment. If the current view prevails, it is possible that Russia’s leaders may choose to maintain military spending even as the economy sinks into stagnation.

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