Russia is currently stuck in an economic quagmire under the dual pressures of Western sanctions and the endurance of low oil prices. The country has suffered losses of over $500 billion since 2014, according to a report released by a team of Russian economists in February. Most analysts predict such stagnation is likely to continue for quite some time.

Though Russian President Vladimir Putin's approval ratings still hover around 80 percent, Russians are nonetheless worried about the country's economy. A poll conducted in February shows that more than half of the respondents were dissatisfied with the domestic economic performance.

How to overcome these troubles and modernize - or transition from - the traditional industries that have historically propped up the economy has thus become a major task for the nation's policymakers. Moreover, which direction Russia will look to for economic coordination and partnership remains a key question. With its troop withdrawal from Syria that began on March 15, will Russia redirect its efforts on restoring relations with Europe; or will efforts to expand economic cooperation with China and other developing countries continue even after Western sanctions are lifted?

Severe economic loss

Statistics from the Russian Federal Statistics Service show the Russian economy in 2015 was worth about 80.4 trillion rubles ($1.1 trillion), a 3.7-percent decrease from the previous year. Other figures are even more shocking: Foreign trade decreased by almost a third and the total trade surplus was $145.6 billion, a 23.2-percent decrease year on year.

Meanwhile, the Russian currency, the ruble, suffered a depreciation of 24 percent against the U.S. dollar, with the exchange rate fell to a record low of 80 ruble per dollar on January 20 this year.

Today, Russia's financial deficit stands at about 1.95 trillion rubles ($26 billion), which accounts for 2.6 percent of its GDP. Residents' real incomes fell for the second year in a row by 4 percent, with 20.3 million people now living below the poverty line. The only things to go up were the price of commodities, with the consumer price index (CPI) increasing by 12.9 percent, and food prices up by 14 percent.

Unfortunately, the overall 2016 outlook was just as gloomy. The World Bank forecast that Russia's economic strength will continue to fall 0.7 percent this year. According to Russian Economic Development Until 2030, a report issued by the nation's own Finance Ministry, Russia could possibly endure a 15-year-long stagnation period.

Rescue measures in place

Russia has adopted a series of policies to maintain domestic market stability and shift exports from resource-based sectors to other industries. Meanwhile, the Russian Government is trying to pursue the lifting of Western-imposed sanctions, and enhance cooperation with non-Western countries.

There are also some bright spots in the Russian economy despite the large, dark shadow. For example, Russia is coordinating with other prominent oil producers to put a brake on the increasing pace of oil production, which is an important step toward stopping the endless slide of the price of oil. On February 16, Russia and some member states of the Organization of Petroleum Exporting Countries (OPEC), including Saudi Arabia, Qatar and Venezuela, agreed to freeze oil production on the basis of the January level at a ministerial meeting in Doha.

Russia's foreign exchange reserves also remain sufficient. The Russian Government has chosen not to gamble by saving exchange rates. Instead, Russia's financial watchdog allowed exchange rates to float freely, which helped avoid a sharp decline of its foreign currency reserves. Sufficient reserves are important in helping to keep society stable and making people confident in the face of economic hardship. Russia's gold reserve totaled $357.8 billion on August 6, 2015. By February 18 this year, the figure recovered to $382.4 billion. The Western forecast, which predicted Russia's reserves would soon be exhausted, failed to occur. The well-known financial baron George Soros has even said that he believes Russia's foreign exchange reserves would last for "a couple of years."

Along with growing confidence, the outflow of capital has been effectively curbed. In 2014, as much as $153 billion in capital fled out of the country, while in 2015, the figure shrank to $56.9 billion. Russia's balance of international payments has been further consolidated, and it shows the investors have regained confidence in Russia's economy.

Russia has also achieved successful agricultural harvests in recent years. Its annual grain output in the past two years was above 100 million tons; the figure is expected to reach 104.9 million tons this year. In the agricultural year of 2015-16, Russia's grain export could reach 32.8 million tons. If it meets those expectations, Russia will surpass the United States to become the largest grain exporter in the world. As a Chinese saying goes, with food in hands, there is no need to be panic.

Banking has also been stable. Unlike previously, more and more people across Russia have started to save money in banks in recent years. In 2015, there was a 25-percent growth in bank deposits from locals, most of whom opened new accounts using the domestic currency.

In February, the Russian Government announced a new "action plan for the stable development of the society and the economy." Russia plans to invest $12 billion to help the development of agriculture, automobiles, the light industry and machinery manufacturing. Russia's endeavor to find domestic substitutions for imported goods has shown some positive results: In 2015, Russia's food imports dropped 35 percent. The same achievement is likely to be seen in its automobile industry in the next few years.

In spite of the government's bold actions to take countermeasures and save its economy from Western sanctions, the real way out is to find a development path that is suited to its national conditions and can bring long-term prosperity. An economic restructuring and transformation is much needed in order to cure its long-standing woes.

Russian military planes begin to withdraw from Syria on March 15 (XINHUA)

Dealing with the West

Russia's diplomacy remains focused on the lifting of sanctions against it. So far, Russia has made some headway in getting rid of its current dilemma, but serious work remains.

A major milestone is Russia's agreement to talks with the EU on the Ukraine issue. In February last year, Russia, Germany, France and Ukraine reached the Minsk Agreement through the four-party talks. Without U.S. involvement, the Ukraine crisis has cooled down and a final solution is expected. Solving the Ukraine crisis peacefully is the first step toward removal of Western sanctions.

As early as December 2014, German Foreign Minister Frank-Walter Steinmeier had expressed that it was impossible to use economic measures to subdue Russia and economic isolation could backfire. The German Chamber of Commerce has also repeatedly called for the lifting of sanctions against Russia.

In January, French Economy Minister Emmanuel Macron said that France would lift the sanctions against Russia as early as the summer if the Minsk Agreement could be implemented effectively. As a whole, the EU is expected to gradually lift the sanctions against Russia mid-year. While attending the Davos Forum in January, U.S. Secretary of State John Kerry also stated the possibility of sanction removal provided that the Minsk Agreement can be observed.

The direction of its compass

In July 2015, Russia hosted two summits in Ufa: the summit of the BRICS (Brazil, Russia, India, China, South Africa) countries and that of the Shanghai Cooperation Organization. In recent years, Russia has been working to enhance its partnership with emerging economies through both bilateral and multilateral means.

Among all of Russia's partners, China's importance is growing rapidly and there is vast potential for increased economic cooperation between the two. China is the world's second-largest economy and its overseas investments are escalating each year. Russia is also pivoting toward its eastern territories for economic expansion. Last year, Russia held the first Oriental Economic Forum in Vladivostok, a harbor city in east Russia, where it announced it will build a free port.

Although the trade volume between China and Russia decreased dramatically in 2015 to $63.6 billion, down 28.1 percent year on year, China remains Russia's largest trading partner and China's proportion of Russia's foreign trade increased.

Yet it is notable that Russia's economic redirection to the East was mainly because of the pressure from the West. Once the EU-Russia relationship improves, the development of the Far East region and its cooperation with non-Western countries might be postponed.

The author is deputy director of the Institute of Eurasian Studies, China Institute of International Studies

Copyedited by Mara Lee Durrell

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