The View From 1776

Moscow Update: Russia Resurgent, Robust, or About to Go Bust?
By Robert W. Stapler

Three things have recently brought Russia into sharp focus.  First is the rising price of oil and Russia’s growing importance in the supply chain, second is Time Magazine proclaiming Putin ‘Person of the Year’, and third (for me personally, and most intriguing) is an oil-investment company alleging Russia is deliberately driving up the cost of oil.  Few of us give much thought to Russia these days, so my initial reaction to this last item was ‘these guys have got to be exaggerating to push a sale’.  Russian market manipulation can’t be as much a factor as dwindling OPEC production, hurricane damage, and that Chavéz clown.  But, what if it’s even partly true, I thought.  This aroused me to revisit our old adversary; wondering what new tricks (or old) they may be up to.  To evaluate Russia and Russians (and why they drive us so crazy) requires an understanding in five parts: Russian character (culture), politics, global & local economics, foreign-relations, and military capacity.  These are significantly interlocked, making analysis of one dependent on the others.

Aspects of Russian Culture

Key to understanding where any one participant may lead is how willing their base is apt to follow.  The most effective leader, in any country, is one who takes his people exactly where they wish to go.  In the case of Russians, this is clouded by conflicting political desires and tensions.  Mainly this tension is between Russians demanding Westernization as against a spiritualized variant of nationalism.  We westerners have always been critical of our leaders, and second guessing them has become our national sport.  In Russia, criticism remains far more veiled (both from long habit and governmental discouragement), excepting Russians are free to agree and rally behind their leaders.  This results in top-down policies with all the appearance of grassroots support (does have enough support to be sustainable for long periods), despite setting goals that are often unrealistic, xenophobic, nationalistic, contradictory, and/or renegade.

Whereas rule of law and reciprocal dealings are articles of faith with us, in Russia (where rules abound, and everything is subject to bureaucratic interference), rule-of-law is held in contempt while highly fluid ethical codes are deemed a matter of justice.  Russians are conditioned (through centuries of absolutism) to look after themselves and immediate circle first, leaving it to others to look after themselves (despite long touted collectivist rhetoric and ideals to the contrary).  These explain how, in the 1990s, during the breakdown of order, so many ordinary Russians readily adopted Mafiaesque behaviors.  This is the same national characteristic we saw in the Soviet Union’s earlier dealings with us; and remains a trait in Russia’s dealings with other nations.  Not that we (Westerners) don’t share these traits; only our society is more relaxed, conditioned by a long tradition of liberty.

Andrew Kuchins at CSIS describes the political culture thus: “Russia today is a hybrid regime that might best be termed “illiberal internationalism,” … From being a weakly institutionalized, fragile and … distorted proto-democracy in the 1990s, Russia under Vladimir Putin has moved back in the direction of a highly centralized authoritarianism, which has characterized the state for most of its 1,000-year history. But it is an authoritarian state where the consent of the governed is essential. Given the experience of the 1990s and the Kremlin’s propaganda emphasizing this period as one of chaos, economic collapse, and international humiliation, the Russian people have no great enthusiasm for democracy and remain politically apathetic in light of the extraordinary economic recovery and improvement in lifestyles for so many over the last eight years. The emergent, highly centralized government, combined with a weak and submissive society, is the hallmark of traditional Russian paternalism.”

It is natural to think all that was oppressive in Russia under the Soviet Union was an expression only of communism, and that its modes of thinking would be swept away without it.  But, what if that is only partly true and a good deal of what we perceive as behaviors ascribable to an ideology was, in fact, part and parcel of the Russian psyche, impressed on Russians through millennial conditioning.  Perhaps we have it backwards, and Russia co-opted communism as an ideology already conformable to Russian notions of governance.  If so, we must go farther back to learn how Russians perceive us, changes to their way of life, and likely reactions.

http://www.und.edu/dept/lang/russian/162/culture.html
http://www.russian-victories.ru/ - example of Russian chauvinism
http://englishrussia.com/?p=1137 – versus more realistic portrait of Russians

History

Russian history, outside oral traditions, is not as old as the rest of Europe and consists mainly in standing in the path of invasions, competing with neighbors for resources, and struggling to maintain cohesion.  Russia has been successively invaded by Huns, Goths, Moslems, Vikings, Cossacks, Mongols, Poles, Tatars, Lithuanians, Turks, Germans, French, and Nazis.  Russia lacks easily defended or well defined borders, and is surrounded by historically hostile neighbors.  It is not the most invaded nation, but it is the most invaded nation aspiring to super-power status.  This background is critical in shaping Russian thinking, with the obvious conclusion Russians, whenever able, will seek to extend their borders, assert their identity, and increase their reach.

Politics, Policy, and a Return to Party Domination

Heritage Foundation’s take (Dec-07) is Russia is moving away from constitutional democracy and the rule of law and is increasingly anti-American; and, there appears to be considerable agreement between both conservatives and liberals this is the case.  The current elections are a sham with a controlled outcome that leaves Putin in charge beyond his legitimate term.  Russia’s heir apparent, Medvedev, is a hand picked Putin crony, with no independent base from which to operate, who must remain loyal on Putin.  Additionally, Medvedev, may remain Gazprom’s chairman, perpetuating the corruption Putin builds on.  Other indicators of this shift include a number of politically motivated beatings and murders, surge in ‘nationalist’ groups, breaking-off arms talks, threats to U.S. allies regarding defensive weapons, new restrictions on the press and sources of information, and changes in election laws that make a mockery of representation. 

Russian democracy enthusiasts generally view the shift with disapproval, but little real concern.

Lack of dialog with the West may partly be our distraction with terrorist, but is also deliberate policy by the Kremlin signaling a sea change in our relations.  For its part, Russia blames us for the breakdown in talks over of our unwillingness to sacrifice space-based and anti-missile defense systems on the alter of arms-negotiation, a capability Moscow still regards as a threat despite access to the same technology and manifest inability of these devices to more than rouse a devastating response.  This is the same complaint made by the USSR in the late 1980s and has no greater validity today.

United Russia Party, with Putin at its head, has taken the lion’s share of representation and is the second most strongly socialist party in Russia.  It is packed with corrupt former Communist-Party operatives, who have made fortunes since the breakup, and now wish to consolidate their positions. Despite the strong association with communism, United Russia’s elite might be better compared to pre-Nazi Germany’s Industrial Junkers.  Hereafter, Duma deputies (representatives) will be chosen from party lists in proportion to votes cast rather than individually elected as before.  Many smaller parties and all independent candidates are excluded from running by exclusionary restrictions and state-run vote-fixing.  This not only invalidates the purpose of voting by denying direct representation, it ultimately undermines legitimacy through reduced voter involvement.  Soon (and this is the point of the policy changes), the small parties will be absorbed or disbanded until there is once again one party rule.  It is not fueled by the old ideology, but it is the same tendency to state-rule.

Russian Economy Too Dependent on Oil & Gas

The Economist reports a mixed picture for Russia. 

Russia, Kazakhstan and Turkmenistan have agreed on construction of a gas pipeline intended to circumvent the EU’s efforts to diversify its energy sources.  In a bid to reinvigorate investment, bidding of oil and gas fields may be opened back up to foreigners, but Putin’s recent track record is still discouraging many from taking the plunge without sufficient safeguards.  Foreign investment since 2004 has significantly declined from a combination of shrinking return on investment, heavy taxation of production, and asset seizures.  Growth in domestic demand remained strong in the 4th-Qtr 2007, despite tighter liquidity, probably due to strong private consumption slowing the decline in investment.  Real GDP growth has slowed to just over 6% per year, an indication the Russian boom is peaking and growing imports (with only moderate export growth) are likely to reduce current-account surplus to 2.6% of GDP by 2009.  Inflation is at 10% and increasing; with high energy prices, strong capital inflows and fiscal loosening fueling the inflationary pressure.  Industrial output growth has slowed to 4.7% year on the year in November 2007 while Consumer prices increased by 1.1% in December, pushing up end-2007 annual inflation to 11.9%—a significant increase on inflation of 9% at the end of 2006.  Public spending is at its highest in 18 years. Russian businesses have generally become less competitive, probably a result of Kremlin influence.  Economic relations with the West have also deteriorated as a byproduct of Russian foreign policy and military ventures. The global credit squeeze is also having some impact on Russia.

Energy accounts for 25% of Russia’s GDP, with 4/5ths representing exports and a positive trade balance.  This makes Russia extremely dependent on oil and gas for economic viability.  While the oil and gas last, Russia can act the tiger, but what will happen once production wanes and ordinary Russians see a return to scarcity?  Already there are indications Russia has been over-producing and cannot sustain present levels.  Moreover, the Kremlin is making claims to Arctic oil beneath international waters in what may be a desperate bid to stave off crisis.

Russia and Its Neighbors

Belarus, Ukraine, Georgia and Turmenistan ( http://www.cfr.org/publication/12327/russias_energy_disputes.html ) have all been subjected to strong-arm tactics (election interference, military maneuvers, assassinations, and gas disruptions in a Kremlin controlled maneuver to squeeze higher energy revenues out of its trading partners.  All four countries have been forced to restructure existing contracts, doubling the previous price of natural gas they receive and cutting the prices they charge Russia for gas transmission.  Belarus is now paying $100/1,000 cubic meters of gas following a Russia threat to cut off its mid-winter gas supply, much as it did to Ukraine last January.  This tactic has elicited some international protests, but does little to thwart Russian economic aggression.  Belarus did threaten Gazprom’s use of its pipelines in retailiaton (20 percent of Russian natural-gas flows through them to Western Europe), leading Russia to temper its demands.  Additionally, Belarus has conceded a 50-percent share in its state-controlled pipeline network to Gazprom.  Ukraine conceded a 5-year contract for gas at $95/1,000 cubic meters.  Much of the gas delivered to Ukraine originates in Turkmenistan, which is cheaper but is transited through Gazprom controlled pipelines.  Russia accused Ukraine of siphoning off its Europe-bound gas and succeeded in wresting guarantees from Ukraine against future siphoning.  Turkmenistan has some the world’s largest reserves of natural gas.  Russia and Turkmenistan have just signed a three-year deal to continue Turkmen gas deliveries via Russia, but Moscow worries a new Turkmen regime may diversify its energy routes other than through Russia (e.g. Iran, China), weakening a virtual Russian monopoly.  Georgia had a price dispute with Russia wherein Gazprom threatened to cut off its supplies, but reached a settlement of $235/1,000 cubic meters. Other incidents include the arrests of four Russians for spying and a Russian boycott of Georgian spirits.  Gazprom’s price hikes have prompted both Ukraine and Georgia to seek alternative gas suppliers.

Russian activity
in the Middle East is, once again, becoming a concern for the U.S.  Russian arms sales to Iran and Syria and its efforts to legitimize Hamas made U.S. efforts to broker an Israeli-Palestinian settlement more difficult.  Russia’s delay in supplying Iran with nuclear materials and its willingness to consider sanctions against Iran can be read either as U.S.-Russian common interests or a gesture to Arab states unhappy with a nuclear-Iran.  Russian-Israeli relations are at their lowest since the mid-1980s as a result of Putin policies, including arms sales to Syria (much of them used by Hizbollah in its 2006 war against Israel), supplying a nuclear reactor and SAM’s to Iran, and support for Hamas (an organization dedicated to Israel’s destruction).  There has been a drop-off in Arab support of Chechen rebels that can only be a result of Russia’s support against Israel and in keeping the U.S. off balance.  Putin has put considerable effort toward strengthening commercial ties, including securing Arab investment, with a number of Middle-Eastern countries.

Russia’s economic integration with the EU has stalled and is frustrating Russian big-role aspirations.  Russia has been encouraging its former republics to drop out of NATO agreements and is intimidating former European satellites to drop their defense plans it views as a threat.  The EU has become heavily dependent on Russian oil and gas, but is understandably reluctant to trust a humiliated but still unabashedly aggressive Russia.  Some, however, are more concerned how Europe may react than how far Russia may push the envelope.

Russian Military and Weaponry

Military estimates:
http://www.globalsecurity.org/military/world/russia/intro.htm, http://www.nti.org/e_research/profiles/Russia/index_5148.html http://www.nti.org/db/nisprofs/russia/weapons/gendevs.htm

Russia has significantly increased defense spending since 2002,
http://www.globalsecurity.org/military/world/russia/mo-budget.htm

and has begun asserting itself within its old spheres of influence.  Both its former internal and external clients are under pressure from Moscow to give way to Russian interests and demands.  Russia, as a fraction of former Soviet Union, may now have as much spending capacity as in 1990, the year prior to economic collapse.  Military spending has jumped 600% since 2002.  While this is far from the SU spending levels of the mid-1980s, it is more sustainable as a percent of Russian GDP.  So, the question becomes, is Russia rebuilding its military and to what purpose?  Not all are convinced this is enormously significant; including some who believe Putin is on the way out.

Even so, all recognize Russia is pushing for a larger role.

In ‘Russia steps up bomber exercises near Alaska’, ‘Is Russia back to Cold War mind-set?’ Military Times notes an increasing number of challenges by Russian aircraft reminiscent of the cold war, and in ‘Russian Navy Turns Up Heat’ NewMax describes combined naval/air exercises with the principle objective of demonstrating Russian capabilities and reestablishing Russian presence in the North Atlantic (also see Russian bombers to Test-fire Missiles in Atlantic). http://www.reuters.com/article/worldNews/idUSL2235954320080122?feedType=RSS&feedName=worldNews

Moreover, Russia is developing a new generation of smart-missiles with the stated purpose of evading American anti-missile defenses; as well as some new mobile strategic ballistic missile systems. 

A little saber rattling may not mean much.  However, the Kremlin has been increasingly belligerent regarding the placement of anti-missile defense systems among its former clients, and has threatened to take military action against them.  Just how far they’ll push this is yet to be seen, but it has already caused the Czech Republic to have second thoughts.  Since the mid-1990s, Russian doctrine has been to use nuclear weapons only in self-defense.  Putin has now reinterpreted this doctrine suspiciously similar to Soviet doctrine wherein nukes were to be used extraterritorially, preemptively, and defending allies or interests.  The question then arise, against whom and why now?  If this not just about the missiles in Poland and Czech Republic (entirely defensive and no threat to Russia), then what is the objective?  The way Russia will interpret this doctrine is very different than we’d prefer it interpreted; including a right to intimidate former clients into granting concessions as it has done in Georgia, Ukraine, and Belarus.

– Bob Stapler (rstapler@aceweb.com)

Alternate and Outdated Analyses – But Well Worth Reading

Putin’s Decline and America’s Response, Aslund Jan-05
http://www.cdi.org/russia/johnson/9010-2.cfm Jan-05
http://www.cdi.org/russia/johnson/9229-18.cfm Aug-05
http://www.cdi.org/russia/johnson/9227-23.cfm Aug-05
http://www.cdi.org/russia/johnson/2007-224-23.cfm Oct-07
http://www.cdi.org/russia/johnson/2007-261-5.cfm 20 Dec-07
http://www.cdi.org/russia/johnson/2007-264-33.cfm 26 Dec-07
http://www.cdi.org/russia/johnson/2007-264-34.cfm 27 Dec-07
Russian Resurgence, Mar-07
Russian Parties are Inching Forward, Jan-03
Russia the constant colonizer – call by a Russian to ‘recolonize’ lost territories
Assessment Russia is assertive, manipulative, and actively undermining American security, though not a direct threat, 1Qtr 07
Russia’s near future can be no worse than under Czar Nicholas I - opinion Putin has been both lucky and inept; assessment, Nov-07

Additional Readings and Background Information

Dec-2000 - Russian demographic trends

Russia Watcher - numerous articles

Putin policies are killing investment

Jan-08 – Russian News Agency, reprint of Daily Telegraph analysis discussing Russian military policy

Jul-07 where Russia may be heading

Politics_of_Russia & Russian_politics

List of recent political murders, attempted murders, and suspicious deaths:
Andrei Kozlov, Alexander_Litvinenko, Anna_Politkovskaya, Roman_Tsepov, Boris_Berezovsky, Altynbek_Sarsenbayev, Anatoly_Trofimov, Paul_Klebnikov, Aleksey_Pichugin, Sergei_Yushenkov, Yuri_Shchekochikhin, Ivan_Safronov, and Three Whales Corruption Scandal (possible victims).
Recent Assassinations Shake Confidence in Putin’s System

Comments on what motivates Russian culture/politics (by a Russian)

Soviet writer worldview, 1927