Can Russia's Economy Survive Putin's War?

As the world watches the ongoing conflict between Russia and Ukraine, a former Russian central bank adviser has sounded the alarm on the devastating impact of the war on Russia's economy. Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center, has warned that the economy is stuck in a "negative equilibrium," where it is "holding itself together while steadily destroying its own future capacity."

According to Prokopenko, the economy is not headed for an imminent crash, but the effects of the war are already being felt. GDP has stagnated, oil revenue has been halved amid Western sanctions, and the government's budget deficit is rapidly draining reserves. The war has also led to the emergence of two economic systems: one that prioritizes the military and related industries, and another that has been "left in the cold."

Meanwhile, in the world of technology, Apple is preparing to unveil its latest products in a "special Apple experience" on March 4. The event is expected to be different from the company's standard press events, but details are scarce.

However, the tech industry is facing its own challenges, particularly in the field of artificial intelligence. AI is "running out of power," with data centers accounting for roughly 4% of U.S. electricity use, a share expected to more than double by 2030. The industry is scrambling to find new sources of power, from building gas plants to exploring small nuclear reactors.

As the AI industry searches for solutions, some experts are looking to space as a potential escape hatch. However, data centers in space are still in the feasibility stage and are not expected to be ready for launch for decades. In the meantime, companies like Nvidia are making deals with Meta to signal a new era in computing power.

While the challenges facing Russia's economy and the tech industry may seem unrelated, they both highlight the complexities and uncertainties of the modern world. As Prokopenko noted, "Russia's economy is stuck in what might be described as negative equilibrium: holding itself together while steadily destroying its own future capacity." Similarly, the AI industry's search for power and the emergence of new technologies are reminders that even the most advanced economies are not immune to disruption.

In conclusion, the world is facing a multitude of challenges, from the devastating impact of war on economies to the complexities of emerging technologies. As we navigate these uncertain times, it is essential to stay informed and adapt to the changing landscape.

Sources:

• Alexandra Prokopenko, "Russia's economy is stuck in a death zone," The Economist
• Sharon Goldman, "AI is running out of power," Eye on AI