Should we be preparing for Russia’s collapse and the global economic fallout that would follow?

The thing about dictatorships is that they always appear to be strong and incontestable until they suddenly fall and we all wonder how such regimes, woven thick with internal contradictions, ever held together for so long.

Wagner chief Yevgeny Prigozhin’s short-lived mutiny in Russia last month could have been the first act in Vladimir Putin’s downfall drama. Alternatively it could have been just an episode in a long war of attrition, one that could entirely degrade Ukraine and weaken Western resolve.

No one is exactly writing Putin off just yet but reports that Russia’s seemingly irrepressible hard man was forced to flee Moscow in a plane, transponders turned off, as his former ally marched unimpeded on the capital was the first clear sign of the potential chaos rippling under the surface in Russia as a result of its botched military campaign in Ukraine.

Putin’s macho personality cult appeared to crumble in an instant.

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But having a Prigozhin – whose mercenaries are accused of human rights abuses in Ukraine – or another right-wing nationalist in the Kremlin could hardly be considered a victory for the West.

The episode proves a basic maxim about world affairs: once the dogs of war are unleashed they’re not easily controlled even by a dictator portrayed as having a vice-like grip on power. It could in theory lead to an escalation in military actions in Ukraine.

Could civil war in Russia or the unravelling of the Russian state be the next big crisis to convulse the global economy?

According to historian Adam Tooze, we’re living in the era of the polycrisis, a term he uses to describe the multiple, overlapping and seeming conveyor belt of crises coming at us.

He refers to shocks emanating from the pandemic, the energy shock resulting from war in Ukraine, a breakdown in relations among great powers, slow growth, rising inequality and a decade of ultra-low interest rates that have led to financial fragility worldwide. And, of course, perhaps the most existential threat of all, climate change.

The term polycrisis was resurrected in 2016 by former European Commission president Jean-Claude Juncker, who used it to describe the experience of trying to govern Europe while confronting a Greek debt crisis, Putin’s initial aggression against Ukraine, the beginning of the Brexit push and a Syrian refugee crisis that was spilling over into Europe.

If the current Russian regime was to founder what would the economic fallout look like?

Global energy and food prices shot up in the wake of last year’s invasion of Ukraine, cementing an unprecedented bout of inflation in Europe and elsewhere that’s still dominating the economic skyline.

While Russia’s economy has been belted by sanctions and boycotts it remains one of the biggest suppliers of energy to global markets. Producing just under 10 million barrels of crude oil per day, it is the third biggest oil supplier behind the US and Saudi Arabia. A sudden halt in supply as a result of a power struggle in Moscow would almost certainly trigger another energy price shock, leaving China and India, now major importers of Russian energy, competing with Western nations for supply.

If a political void restricts exports of other commodities, such as grains and fertilisers, prices in a range of other sectors could also surge.

While headline inflation here and across the euro area is falling, core or underlying price growth, which strips out volatile energy and food prices, isn’t going down in any meaningful way, a worrying sign perhaps that inflation is becoming entrenched in the system as policymakers had feared.

In its recent annual report the Bank for International Settlements, a Basle-based institution that advises central banks, warned that “despite the most intensive monetary policy tightening in recent memory, the last leg of the journey to restore price stability will be the hardest”. It said there was “a material risk that an inflation psychology will take hold, where wage and price increases start to reinforce each other”.

Another global price shock would presumably increase this risk considerably.

Bloomberg Economics estimates that Putin’s war in Ukraine will reduce Russia’s gross domestic product by $190 billion by 2026 compared with the country’s pre-war path.

The geopolitical fallout from a Russian collapse could swing in a myriad of directions. It has the potential to create instability along Russia’s border from the Baltic states to central Asia. Given Russia’s vast size and the large non-Russian ethnicities that exist in several regions, the break-up of the federation is a distinct possibility.

And where would it leave the great economic and political rivalry of the 21st century between the US and China? On a path of rapprochement or greater divergence?

The UK government is already said to be scenario planning for the sudden collapse of the Russian Federation, according to internal documents leaked to the media.

The plausible climbdown for Putin probably involves Russia maintaining control of Crimea and parts of eastern Ukraine, allowing him claim a victory of sorts. But it’s an unpalatable deal for Ukrainians and one that would leave the state at risk of future conflict with Russia.

Putin’s disastrous military gambit in Ukraine poses an existential threat to his survival with entirely unpredictable consequences, as the Prigozhin episode illustrates.