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Putin’s Cold War
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John O’Sullivan

Vladimir Putin, the former KGB agent who rose to become president of Russia, has recently been a whirlwind of activity. In the last few weeks he has reshuffled his Cabinet, wooed the new German chancellor (and current European Union president), Angela Merkel, denounced the United States at an East-West security conference in Germany, and visited Saudi Arabia and the Gulf state of Qatar for quasi-secret talks on energy. All of these events reflect in different ways the recent revival of Russia as an important power whose interests other nations must now consider. They also reflect the internal success of Putin in reestablishing a strong central government in Russia following the anarchic failures of the Yeltsin years. But they are built on shaky political, economic, and demographic foundations — the current high international price for energy, a falling ethnic Russian population within the boundaries of the Russian federation, and the instability of Russia’s post-totalitarian politics. These risks lie mainly in the future, but one risk that concerns Putin himself is rushing towards him. Under the present constitution, Putin’s presidency ends next year and he cannot serve a further term. In theory this could be a watershed event in Russian politics. Putin has built a new centralized authoritarianism — call it “guided democracy” — around himself and a coterie of former KGB agents. He has transformed the regional governors into mere agents of the Kremlin, brought the television news media under the control of an informal censorship, shaped the major political parties into supportive clients of his administration, and either driven out, imprisoned or bought off the once-powerful economic “oligarchs.” If he and his allies in the “siloviki” — those politicians and officials with links to secret intelligence agencies — were to lose office, that would put at risk this new structure of power.

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Putin’s recent reshuffle of his Cabinet, however, suggests that he has little or no intention of allowing this to happen. His most important decision was to appoint the most senior silovik, Defense Minister Sergei Ivanov, to be first deputy prime minister with special responsibility for overseeing Russia’s military-industrial complex. In the opinion of most observers that set Ivanov up to be the official candidate of the current Kremlin for next year’s presidential election. His election would signify that Putin’s siloviki establishment would retain power under a new face.

Some Kremlin insiders go further than that. Gleb Pavlovsky, a Kremlin “spin-doctor” — yes, they have them there too — was quoted by Radio Free Europe/Radio Liberty as suggesting that Putin himself would still be pulling the strings: “A democratic nation cannot not release its leader, but it can provide him with the opportunity to change from one job to another.”

To be sure, the voters have got to ratify Putin’s choice in due course. That should not be hard to arrange, however; the Kremlin’s candidate will have a near-monopoly of campaign finance, media coverage, and respectable party support. And just in case the voters show a strong aversion to Ivanov, they will likely to be able to choose a second “official” candidate, namely Dimitri Medvedev, another first deputy prime minister, who is reckoned to be slightly more liberal than the siloviki (no very great achievement) and thus more appealing to voters nervous of their growing power.

So Putin seems to have the succession problem well and neatly solved. His successor will be the same man under a different name.

That was not, however, the sole purpose of the Kremlin reshuffle. Putin’s appointment of Anatoly Serdyukov, a financial expert, as the new defense minister is widely seen as an attempt to crack down on corruption in military contracts. That in turn is an essential first step in the modernization and restructuring of Russia’s armed forces. And a larger strategic military reach — which the USSR enjoyed but which Russia has lost — to match the country’s growing economic power is the next step in the siloviki’s program to revive Russia’s great power status.

That ambition was displayed recently both in Putin’s meeting with Merkel and in his denunciation of America at Munich. Putin would dearly like a close Russo-German alliance as the cornerstone of a close EU-Russia relationship. As so often with Soviet foreign policy, however, Putin at Munich sought too many objects at once. In particular, he tried to pressure the new democracies of central Europe into abandoning their involvement in the proposed U.S. system of missile defense while also seeking to separate Europe as a whole from the U.S. His threats over missile defense — supported by other threats to abrogate the Russo-American treaty on medium-range nuclear missiles — alarmed everyone. They also struck Europeans as spectacularly hypocritical since the proposed missile defense is (or was) not designed against Russian missiles. It is meant to deter attacks from ‘rogue’ states such as Iran — which Putin is supplying with missiles and nuclear know-how as part of his extra-European policy of building alliances with anti-Americans around the world. So the net impact of these clashing Great Russian imperatives was to embarrass Merkel, drive even left-wing Europeans into Washington’s waiting arms, and augment the influence of Eastern Europe as anti-Russian bloc within both NATO and the EU.

Putin should have foreseen exactly this since he had made an almost identical mistake over energy policy only last year. It is, of course, the high world price for oil that is fuelling both Russia’s revival and Putin’s ambitions. The Russian president has made it very clear that Russia intends to use energy as a political weapon — in particular as a means of regaining control over its former satellites — by such actions as cutting off gas to Ukraine, raising energy prices overnight to the Baltics, designing a Russo-German pipeline that would go undersea rather than through Poland, and seeking to frustrate Polish plans for access to non-Russian energy sources. His mistake was to forget that the former satellites now have influence in Brussels as EU member-states. They accordingly blocked a trade deal between Russia and the EU that Germany had badly wanted. To Merkel in her meeting with Putin then prevailed upon him to re-draw the plans for the Russo-German pipeline so that Poland would enjoy access to it.

Putin’s energy ambitions had been briefly checked on that occasion — and now he was checking his strategic ambitions by giving the kiss of life to Atlanticism.

Still, in pursuit of both, Putin journeyed from Munich to Riyadh. Though the talks with King Abdullah were secret, the speculation is that he was seeking to establish a “gas cartel” with Gulf producers that would help establish a high but stable long-range price for gas and so prolong Russia’s (and Saudi Arabia’s) benefits as the world’s two largest energy producers. This is not an irrational policy, but it is fraught with difficulties: Cartel members always have an incentive to sell more gas by quietly cheating; if the price is below the long-run optimal monopoly price — which is itself a matter for guesswork — they will cheat themselves; and if it is too high, they will enjoy a short-term bonanza at the cost of an eventual collapse in energy prices as new producers and substitute products are attracted into the market. In other words, such a cartel would be like Marshall Aid for Alberta.

After all, that is exactly what happened to oil prices between 1973 and last year. Reagan’s de-control of energy prices was one of the factors that undermined the Soviets in the 1980s and helped to win the Cold War.

Putin is therefore hoping to indefinitely extend Russia’s current oil bonanza — the higher world oil price means another $75 billion revenue annually — to restore its imperial status when he should be considering how to use a temporary to remedy the country’s long-term problems. These are Russia’s declining population and its economic over-dependence on energy.

Russia today has a population of 149 million. Projections suggest that it will fall below 100 million by 2050. In purely economic terms that might be accommodated: Analyst Martin Hutchinson points out drily that you can save a lot of money by delaying pension benefits when the average life-span ends at 68. Within that total, however, Muslim citizens will represent a growing percentage of births — on one estimate Muslims will be one quarter of Russia’s armed forces by mid-century. Given that Russia’s “near abroad” includes Iran, the Muslim “Stans,” and a growing China, these figures are inconsistent with Putin’s foreign policy of arming Iran, threatening Europe, and forging an anti-American third-world coalition.

Russia is doing some things right to diversify its economy: it attracting foreign investment, rationalizing its tax system, and raising its labor productivity substantially. But business is still corrupt, the rights of foreign owners are politically vulnerable, and its “rule of law” is still subject to political manipulation, as the seizure and sale of Yukos assets (not to mention the incarceration of its owner, Mikhail Khodorkovsy) demonstrate. Nor are these mere accidental blemishes on an emerging market democracy. They arise directly from the siloviki democracy that Putin has built.

In the Australian journal, Policy, Aviezer Tucker of the Queen’s University in Belfast recently published a study on the differing fates of post-authoritarian and post-totalitarian societies. Among his conclusions was that as a result of the attempt to create an entirely new social order, post-totalitarian societies like Russia are too wounded and misshapen to return to normality. All the non-political elites have been eliminated. So such societies continue to be ruled by the old nomenklaturas, in particular by their old secret police networks, which seize the properties of the state. But instead of managing them in a capitalist fashion (since they lack the skills to do so), they gradually consume the assets for their own economic benefit and political power. In such a society, there is no real rule of law, no safe property rights, no real capitalist development.

As Tucker writes: “New wealth in Russia . . . lies under the ground. Extracting that wealth, exporting it, and appropriating the proceeds also requires political power . . . These were the reasons why the Russian security elite needed political power — the Putin restoration.”

Domestically that restoration has meant robbing the Russian people through bogus privatization. Economically it now means persuading foreign investors to create new wealth to steal. And strategically it means employing that wealth to bully anyone who looks either vulnerable or competitive. But what happens when the oil price falls and the wealth runs out?



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