With the incorporation of Crimea into Russia by force of arms about to become a fait accompli next week, speculation is increasingly turning to the longer-term implications of Vladimir Putin’s audacious land grab. Historical parallels like Hitler’s Sudetenland thrust or the Soviet invasion of Czechoslovakia in 1968 are useful up to a point but ultimately irrelevant. There is however, a historical precedent of uncanny similarity and predictive power that has remained largely unmentioned in the ocean of ink already spilled on the Ukrainian crisis. It’s also a precedent that is about to prove philosopher George Santayana right when he said that “those who cannot remember the past are condemned to repeat it.” He could have had Mr. Putin in mind.
Four decades ago, the Soviet Union won the right to stage the 1980 Summer Olympics. This was a sign of its growing recognition as a confident superpower and an economic giant fed by a never-ending deluge of petrodollars, courtesy of the Arab oil embargo in the 1970s. Its Cold War opponent, the United States, on the other hand, seemed mired in self-pity and a sense of malaise, as its timid and feckless president of the late 1970s, Jimmy Carter, never tired of reminding his fellow citizens.
Then, on Christmas Day 1979, in a fit of great-power hubris, Moscow sent 100,000 troops to Afghanistan to protect the brotherly Afghan people from themselves. President Carter responded by banning U.S. athletes from participating in the Olympics. The boycotted Olympics, of course, failed. Much more important, in short order the Soviet military proved to be quite a bit less than ten feet tall, and its vaunted economy but a giant on legs of clay waiting for a push to send it to the proverbial dustbin of history. This push came courtesy of President Ronald Reagan. By the last year of his presidency, the “evil empire” had acknowledged defeat in Afghanistan, and it promptly began imploding, as coercive empires inevitably do when they stop growing. Three years later it was no longer.
Thus, his triumph in forcibly annexing foreign territory is to be of short duration and likely to usher in a process of international opprobrium and economic ruin that will ultimately cost him his Kremlin power. For there is another powerful parallel between today’s Russia and the Soviet Union of the 1980s. Like the latter, Putin’s Russia is entering a period of economic stagnation, if not outright recession, which will only be exacerbated by Western sanctions. Last year, Russia’s GDP growth slowed down to 1.3 percent with 6.5 percent inflation, the worst result since the 2009 recession, and this year will not be better. Even before Putin’s land grab, economics minister Alexey Ulyukaev forecast yearly growth to 2030 at only 2.5 percent, with inflation at least twice that, while Putin’s former long-term finance minister, Alexei Kudrin, sees Russia able to cope economically only if oil prices keep increasing by 20 percent to 30 percent per annum. In the meantime, Putin’s blatant disregard for international norms of behavior and the threat of sanctions have already brought about a dramatic devaluation of the ruble and a run for the exits by Russians with money. Capital flight in just the first quarter of 2014 is forecast to exceed the estimated $62.7 billion that left Russia in 2013.
Nor is there much Moscow can do by brandishing the oil-and-gas weapon, as poorly informed Western pundits keep suggesting. While in 2000 Europe depended on Russian gas for 48 percent of its consumption, last year the figure was 25 percent and declining further. Back then there were few liquefied-natural-gas (LNG) terminals providing alternative gas supplies, while at present Europe operates 16 of them with at least as many new ones planned. Eastern Europe, long the region most dependent on and abused by Russian monopolistic practices, is also on its way to emancipation. Poland is completing its first LNG terminal at Świnoujście and Lithuania is constructing a floating LNG facility for use in the ice-free port of Klaipeda by the end of this year. With additional LNG terminals being planned in Croatia and Greece, the idea of building a North-South gas-distribution corridor in Eastern Europe has picked up support during the crisis in Ukraine and finally looks feasible. This almost certainly means the end of the Gazprom-sponsored South Stream pipeline project, which was designed by Putin as an instrument of political blackmail of Kiev.
Finally, the possibility of using this economic crisis to introduce long-needed market reforms is unlikely to be used by the Kremlin boss because they run counter to his personal power interests. Since coming to power nearly 15 years ago, Putin has done everything possible to put all key sectors of the economy back in the hands of state-owned companies controlled by him, and he has succeeded. According to economist Anders Åslund, currently two-thirds of Russian stock-market capitalization represents government-owned companies. These are highly inefficient and a burden on the economy, but they make it easy for Putin & Co. to steal the money they need to maintain political control. This is why the Sochi Games cost three times as much as they would have in the West, and why a kilometer of gas pipeline in Russia costs two to three times more than in Europe.
And that’s why things will not change for the better in Russia until the Russians realize the wisdom of the ancient philosopher of war Sun Tzu, who taught us that “a kingdom that has once been destroyed can never come into being again,” and get rid of Mr. Putin.
— Alex Alexiev is a senior fellow at the International Assessment and Strategy Center in Washington, D.C.