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American Interest:What Russia Will Be

What Russia Will Be

Source:American Interest

Reprint link:https://www.the-american-interest.com/2018/10/25/what-russia-will-be/

What Russia Will Be
Four scenarios for the future of Putin’s Russia, and Russia’s Putin.

The historical record is littered with spectacularly false predictions about Russia and its relations with the outside world. Consider just a few examples.

Speaking to a joint session of Congress on March 1, 1945 upon his return from the Yalta summit with Churchill and Stalin, President Franklin D. Roosevelt declared, “We are going to get along with the Russians just fine.”1 Two years later, the Cold War was on.

In the 1960s, Harvard economist John Kenneth Galbraith, among many others (including Soviet physicist and dissident Andrei Sakharov), advanced the “convergence” theory to demonstrate that industrially advanced societies like the United States and the Soviet Union were fated to resemble each other in light of the functional logic of modernization.2 Within two decades, Soviet leaders had abandoned centrally planned socialism as unworkable.

In the early 1980s, faced with the arms build-up of the Reagan Administration, U.S. Sovietologists spoke almost as one voice in denying that the United States could outspend the Soviet Union in the arms race.3 By Reagan’s second term, Gorbachev had thrown in the towel, acknowledging that the Cold War would bankrupt Moscow much earlier than Washington; by November 1991, the Soviet Union actually was bankrupt, unable to service its foreign debt or even fund its embassies abroad.

Practically until the end of the Cold War, nearly all U.S. scholars and policymakers accepted as nigh impossible that a superpower like the Soviet Union could allow a non-violent dissolution of its external empire in Eastern Europe, not to mention the disintegration of the Soviet state itself; thus, as late as 1989, senior Bush Administration Defense Department official Robert Gates foresaw a continuation of Cold War logic in American-Soviet relations.4 Yet both the Soviet empire (1989) and Soviet state (1991) disintegrated without a fight.

In the 1990s many U.S. economists and senior Clinton Administration officials anticipated a self-reinforcing logic to post-Soviet Russia’s “transition” to market democracy and conducted U.S. policy accordingly.5 By 1999, both liberal capitalism and liberal democracy were discredited in Russia. At the same time, and in apparent tension with the premise of Russia’s liberal transition, the Clinton Administration began the fateful process of NATO expansion, confident in the belief that Russia after communism was simply too weak and too dependent on the United States and its allies to be able to do much about it.6 Vladimir Putin has played a major role in falsifying this hypothesis.

The flaw in such predictions, indeed, with prediction itself, is less a lack of specific knowledge (although it mattered a lot that the Soviet economy was in fact a third the size of the American, not two-thirds, as almost everyone thought)7 than of the necessary task of linear extrapolation; namely, projecting into the future based on as solid an empirical base of the past and present as it is possible to construct. In fact, the problem is less extrapolation per se as unqualified extrapolation; in other words, projecting from the past and present into the future without at the same time attempting the reverse, projecting hypothetical futures (probable and improbable) backward from a postulated future to the presumably known present. Such an exercise, were it done regularly, would sensitize predictors to the enabling conditions of their forecasts: Assuming that the future improbable (or even impossible) event had happened, what are the elements of discontinuity—which by definition cannot be extrapolated in linear fashion into the future—that would have had to intervene in order to render the improbable less so?8

I attempt both kinds of extrapolation, progressive and regressive, in the following discussion of Russia’s future.

To anticipate the full argument: Putin has been a ruler of consequence for Russia. He reconstituted a functioning state after it had virtually ceased performing the most elemental tasks of statehood in the late 1990s (raising adequate public revenues, policing borders, defeating and deterring internal rebellion, establishing the primacy of governmental over purely private interests in the running of the state, the institution of prudence in the public fisc, and so on). He also presided over an unprecedented increase in private living standards, restored national pride in domestic and foreign affairs, unified the foreign and domestic branches of the Russian Orthodox Church, and successfully contained the further encroachment of NATO toward Russia’s frontiers through limited wars in Georgia (2008) and Ukraine (2014). Along the way, Putin has achieved a remarkable degree of political legitimacy based on both charismatic and traditional elements.9

In doing so, Putin has constituted a political machine that is fundamentally a personalist network, based especially on comrades from the various security and intelligence services, rather than a truly institutionalized system of governance that can operate independently of particular officeholders. In this system, Putin performs the role of capo di tutti i capi, the indispensable power broker who ensures, in addition to resources adequate to sustain a viable state, a reasonable distribution of spoils among strategic clients, and avoids a communal version of a Hobbesian war of all clans against all.10

Above all, the succession issue remains what it has been in Russia since the demise of Czardom: a matter of court politics, whatever the legal forms. In more than 18 years as Russia’s primus supra pares, the question of succession has been decided by Putin and Putin alone. Constitutional forms matter little, as Presidents and Prime Ministers may exchange places without any impact on the center of decision-making gravity in the system. Likewise, term limits are extended at Putin’s whim; Putin is now serving his second six-year term as President, after having served first two four-year terms and then a four-year term as Prime Minister. Eerily, Leonid Brezhnev died after 18 years as Soviet chieftain, having blocked a generation of plausible successors and bequeathing a leadership bereft of clues for addressing the economic and political morass into which the Soviet Union had by then sunk.

Putin knows this, and he also knows that his principal challenge in the near future is to find a way to institutionalize his system without in the process undermining it. The difficulty is that Putin has built a machine based on those he trusts, at the most elemental personal level. These, in turn, have for the most part displayed unflinching loyalty toward him, for which they have also been handsomely rewarded. The ensuing corruption, which actually dwarfs that of the infamously corrupt Russian 1990s (because the economy is significantly larger now), has in turn acted as a damper on the country’s economic development.11 By early 2014, when the price of oil was near $110 per barrel and before the advent of Western economic sanctions, Russian economic growth had declined to zero percent per annum.12 The country had exhausted the economic infrastructure inherited from the Soviet Union:13 The raw corruption, bureaucratic opacity, and legal nihilism that are the hallmarks of the Russian political economy have effectively deterred both foreign and Russian investors from committing the enormous sums of direct investment capital required in order to truly modernize the Russian economy. Declining oil prices and economic sanctions have mightily reinforced this stagnation, but they have not created it. As a result, Putin’s Russia now faces not just an impending and predictable political crisis (who and what will succeed Putin?) but an economic one as well (what could succeed natural resources as the wellspring of Russian economic growth and productivity?).

Putin’s Russia now faces not just an impending and predictable political crisis (who and what will succeed Putin?) but an economic one as well

In this respect, Putin’s Russia has much in common with the Soviet Union in the early- to mid-1970s. On the surface, Brezhnev’s Russia seemed strong, disposing of enormous resources and impressive inertial stability; indeed, this seemed so true at the time that Soviet dissident Andrei Amalrik, in his famous polemic Will the Soviet Union Survive Until 1984?, thought that the impulse for shaking the system up could only come from abroad (via war with China), not from within. By 1968, the Brezhnev leadership had decided that structural, decentralizing economic reforms were too risky politically: The invasion of (reform-communist) Czechoslovakia that August reflected that insecurity and put an end to serious economic experimentation until the Gorbachev era.14 (And even then, the Soviet old guard defeated Gorbachev’s proposal to dismantle the Stalin-era collective farms.)

Subsequent efforts to substitute foreign capital resources, made possible through détente with the West, for those otherwise possible only through domestic reform failed to jumpstart the Soviet economy. By 1985, when the United States counted some 40 million personal computers in use, the Soviet Union had just 50,000 (a ratio of 800:1), and those were mainly in the military sector, which was in any event hopelessly behind its NATO adversaries in the computerization of the armed forces.15 By 1980 at the latest, the Soviet economy had ground to a halt and the political leadership, unable to renew itself, had not a clue as to what to do about it. Systemic stagnation had set in.

How does Putin’s Russia compare to the mid-Brezhnev era?

The similarities are arresting. Russia’s economy, which grew at 7-8 percent per annum between 1999 and 2008 as world oil prices rose from $11 to $145 per barrel, now struggles to grow at 1-2 percent. By late 2013, before the decline of the oil price from $110 to $28 in 2014-15 and before the imposition of Western economic sanctions over Russia’s Ukraine policy, economic growth had declined to zero percent. If historically high prices for oil were unable to sustain Russian growth (as was true for the Soviet Union between 1973 and 1985), this suggested a systemic crisis in economic productivity due to woefully insufficient capital investment, a problem that Western sanctions have exacerbated.16 In certain respects, economic prospects for Putin’s Russia remain more hopeful than for Brezhnev’s USSR, as in the latter case Soviet planners continued to commit massive sums of investment capital to the military and industrial economies with little to show for it; today, it is capital flight to the West that has assumed the role of wasted investment, meaning that there remains a gigantic pool of capital abroad ready to be invested in Russia, given favorable legal and institutional conditions.17 Moreover, contemporary Russian military spending, at less than 4.5 percent of GDP (and currently declining), is but a fraction of Soviet-era expenditures. In sum, Putin’s Russia retains very substantial potential capital resources. Under post-communist circumstances, however, these cannot simply be commanded by the government but rather must be induced from Russian and foreign investors who have many other choices for ways to invest their assets.

In the sphere of corruption, Putin’s Russia also bears comparison with Brezhnev’s, except that Putin’s clients dispose of massive private assets nominally protected by Russian law (but in fact dependent on Putin’s pleasure). Emblematic is the financing of the 2014 Winter Olympics in Sochi. In 2013, Prime Minister Dmitri Medvedev stated that the costs of the games had already amounted to some $50 billion, $7 billion more than the 2008 summer games in Beijing, until then the most expensive games in history and with four times as many events as the Sochi Olympics. (The winter games in Vancouver cost just over $7 billion in 2010.) Tens of billions in no-bid contracts were let out to Putin’s clients, including childhood judo partner Arkady Rotenberg. In the end, the games were effectively if not efficiently pulled off. On two occasions, however, Putin himself had to visit the site of the ski slopes to ensure that proper priority was being paid. After nearly two decades of Putin’s rule, corruption remains central to the functioning of a Russian state that struggles to establish even minimal administrative competence.

Already by late 1973, a series of health problems reinforced by a narcotics addiction began to render Brezhnev increasingly unfit to govern.18 This cannot be said, yet, of the 66-year-old Putin, even after 18 years at the top. At the same time, Brezhnev remained in power until his death in November 1982 (at 75) because no elite coalition could envisage any better alternative. He was succeeded by contemporaries Yuri Andropov and Konstantin Chernenko until each’s death just over a year into their tenure. For 17 years, since the invasion of Czechoslovakia in 1968, Soviet leaders had put off consideration of economic reform and for a full decade (1975-85) they punted on the question of leadership succession.19

Putin faces a comparable situation, replete with comparable dilemmas. Movement toward a more liberal economic order was halted after 2003 with the arrest of oil magnate Mikhail Khodorkovsky, who was planning to merge with Exxon and use his oil revenues to challenge Putin politically. Since then, the Russian state—really Putin’s presidential administration—has acquired the lion’s share of Russia’s economic base, upwards of 55 percent directly and indirectly by most counts.20 Along the way, Putin has failed to move the Russian economy away from its dependency on rents from natural resources, in particular the fuels sector.21 The result: While low oil prices can do serious harm to the Russian economy, high prices no longer necessarily help it.

Relatedly, structural tendencies in the global fuels markets—above all, the revolution in shale and related oil/natural gas production in the United States—are working against a reliable return to historically high prices (defined as above $100 per barrel). This has placed secular constraints on the Russian political economy, as revenues from fuels often make up half of the Russian government’s budget.22 And the politics of budget-cutting and entitlements reform are no less sensitive in Putin’s Russia than they are throughout the Western world. In late 2004, for instance, the Russian government attempted a reform of many public entitlements, changing in-kind benefits (like free public transport for veterans) to cash payments. These payments would not be indexed to inflation, which was the whole point of the exercise: Putin’s finance officials were trying to reduce long-term government obligations in light of an increasingly unfavorable demographic pyramid. In the event, the reform triggered widespread protests throughout Russia, including among rural and older Russians—key parts of Putin’s political base—and the reform was quickly abandoned. In 2018, faced with uncertain long-term revenue flows from the fuels sector and unfavorable labor demographics, Putin’s government floated a pension reform, proposing to raise the retirement age over time from 55 to 63 for women and from 60 to 65 for men. That too turned out to be dangerously unpopular, with more than 1,000 protestors arrested in some 33 towns and cities across Russia. On October 3, 2018, Putin signed the pension reform into law, though he reduced the new retirement age for women from 63 to 60. The announcement of the reform saw Putin’s approval rating drop 12 percentage points, from 79 percent in May 2018 to 67 percent in September.23Putin’s political choices are clearly becoming more difficult as the economy stagnates and society ages.

Putin’s political choices are clearly becoming more difficult as the economy stagnates and society ages.

That Putin himself enjoys a charismatic legitimacy in Russia is not in doubt. Polling from the politically independent Levada agency has borne this out over many years.24 Moreover, Putin’s annexation in 2014 of Crimea, which nearly all Russians regard as properly Russian land, ensures Putin’s place in Russian history and likely as Russia’s leader for as long as he wants to serve. At the same time, the Levada polls also show that a large majority of Russians have consistently distinguished their attitude toward Putin as a kind of tribune of the people from the government, which very many Russians regard—apart from the armed forces—as corrupt and incompetent. It is thus far from clear the extent to which the Russian government, such as it is, possesses the authority to impose sacrifice on a population that continues to view it, as distinct from Putin, as “Them.”

That is partly why obvious corruption, the kind that constitutes a kind of ritual public humiliation, can still trigger public mobilization in Russia. These include the mass protests against the 2004 benefits reform and the widespread demonstrations against the falsified parliamentary elections of December 2011. Back in 1985, reviewing the Soviet economy that he had inherited, Mikhail Gorbachev rejected strict austerity measures because he believed that the population would no longer stand for it: A radical change from the status quo had to be attempted, implying economic reform and foreign policy détente. For the foreseeable future, neither seems to be on the Putin policy agenda.

Finally, Putin has done much too little to institutionalize the impressive political machine he has built up since the early 2000s. Executive power has yet to change hands in post-communist Russia through elections that are meaningfully free and fair; instead, tight and opaque cabals tied to Putin have decided the issue. It is the location of Putin in the system—whether as President or Prime Minister, or perhaps in the future as some behind-the-scenes Godfather—and not the office in the system that determines the political center of gravity in contemporary Russia.

When the war with Georgia broke out in August 2008, for instance, Putin immediately flew to the Caucasus from the Olympics in Beijing to direct the war, even though now as Prime Minister he had no constitutional or other legal authority to do so.25 In 2010, Dmitri Medvedev, still President, ostensibly engineered the removal of long-time Moscow mayor Yuri Luzhkov. His replacement: Putin’s chief of staff Sergei Sobyanin. In this respect, Putin’s Russia suffers in comparison with the late Soviet Union, where it was the office of General Secretary of the Communist Party that conferred power and (elite) legitimacy upon the man. Instead, Putin the man confers legitimacy upon his office.

To date, Putin’s system has proven remarkably stable and, as noted at the outset, able to address a series of pressing public policy issues. Yet were Putin to disappear from the political scene tomorrow, Russia would have neither a formalized process for choosing a successor (in spite of the constitutional provision that the Prime Minister succeed the President pending new elections) nor anyone recognized by the elite as an indispensable power broker.

Does this mean, then, that Putin’s Russia is fated to follow the path of the Soviet Union toward decline and implosion? Not necessarily. As the first of the following four scenarios suggests, decline is very likely; implosion is not.

Scenario 1. Continuation of the Status Quo

Putin has spent most of his nearly two decades as Russia’s ruler reconstituting a viable state in the form of a network of clients whose wealth depends on his grace and who have in turn exhibited impressive loyalty toward him. These clients are disproportionately from the Russian “militocracy,” that is, the military and paramilitary services, including intelligence, that were the primary sources of professional socialization for Putin himself.26 While Putin has retained the services of professional economists, especially within the financial realm, liberal- and social-democratic tendencies were effectively abandoned by his second term (2004-08). Taken together with the record of Russian liberals in the disastrous 1990s, when Russia virtually ceased to be a functioning state, as well as their own internal divisions, a Western-oriented liberalism is a spent force in Russian politics.

The Russian system that Putin has built and consolidated is based on the following key elements, several of which have already been mentioned:

The public administration—including the electoral machinery and national broadcast media—has been captured by the Putin network and converted into an extension of executive preference. Elections have thus become highly managed affairs with the appearance of popular legitimacy but a minimal chance that the government might change hands through such means.27
When Putin took over, first as Prime Minister in August 1999 and then as President on January 1, 2000, the “Russian Federation,” such as it was, resembled at best a confederation rather than a unitary state or even a federation. Since then, Putin has systematically reduced the capacity of “federal” units (including those defined by ethnicity) to escape monitoring from Moscow. This began in 2000 with the appointment of seven supra-regional viceroys (most from the military or intelligence services) reporting directly to Putin and includes most recently, in summer 2017, the reduction of Tatarstan’s administrative autonomy. Russia today more nearly resembles a unitary state than the “federation” that remains in its official name: There are no irrevocable sovereignties under Putin’s rule.28
The national political order is based on Putin’s charismatic authority rather than legal tradition or a reputation for institutional competence. Comparisons with imperial-era loyalty of peasants toward the Czar—“if only the Czar knew!”—are not far-fetched. An extreme example of Putin’s personalismo may be seen in the status of Chechnya, whose relations with the rest of Russia are mediated through a personal bond between Putin and Chechen warlord Ramzan Kadyrov.29
Putin’s presidential network has established direct or indirect control over half or more of the Russian economy, including most of the lucrative natural resource sectors. At the same time, the Russian economy remains stuck in the mold of a natural resource, rentier political economy, with declining long-term economic performance.
Putin has made sure that this political economy, even while deteriorating, is managed prudently. The bankruptcies of both the Soviet economy and the Russian economy after the collapse of oil prices in 1986 and 1998, respectively, have seared themselves into Putin’s political memory. He ensured that Russia’s public coffers had sufficient revenues to survive the oil shocks of 2008 and 2014. Russia’s national debt as a percentage of GDP (12.6 percent in 2017, compared to an EU average of 81.6 percent for that year) is minimal in comparative terms, while Russia has maintained impressive trade surpluses over many years ($103 billion in 2016). From this perspective, Putin’s Russia is no mere “mafia state”: Were it simply that, there would not have been available the public resources needed to survive the two massive financial shocks over the past ten years.30
Such fiscal prudence has also allowed Putin to rebuild the Russian military in a manner that corresponds to Russia’s aspirations to be a regional power of consequence, as operations in Crimea (2014) and Syria (2015-present) have shown.31 Russia’s military, together with the Orthodox Church, the most trusted institution in the country, remains loyal supporters of Putin.32
With a discredited liberal wing, the alternatives to Putin for the foreseeable future are all along the right-wing axis of xenophobia (especially against the West), chauvinism, and anti-Semitism (although Putin himself is no anti-Semite and has not encouraged it). Putin has exploited these forces to his benefit but he is not in thrall to them.33 Yet absent Putin, these would become the dynamic, populist forces in Russian politics.
Relatedly, all Russian elite clans, including those with access to organized armed force (regular military, border troops, police, intelligence, and Putin’s own personal praetorian guard of some 350,000 troops), acknowledge Putin’s indispensable, and possibly irreplaceable, role in the political economy.34 After the 2008 war in Georgia, which revealed multiple shortcomings in the functioning of the Russian Army, Putin oversaw a wholesale replacement of the armed forces’ upper echelons, leaving in place a leadership that is both more competent (as witnessed in the Crimean and Syrian operations) and beholden to Putin. As an intelligence professional, he has the trust of the militocracy as a whole; as an intelligence professional turned head of state, Putin also controls all of the personal files—and resulting kompromat—on the elites, and they know it. They thus serve, and enrich themselves, at his sufferance.
Taking these characteristics of the Putin political economy as a whole, what do they imply for Russia’s short- to medium-term future?

Assuming that (a) Putin remains in power through 2024, (b) the price of oil fluctuates within the $55-$85 per barrel range, and (c) Western economic sanctions remain in place, we can expect to see a Russian economy that remains disproportionately based on fuels and other natural resources and struggles to grow at 1-2 percent per year. Western sanctions working in tandem with the massive corruption endemic to the Russian political economy inhibit the ability of the Russian government and private investors to revitalize the industrial infrastructure, including in the fuels sector.35 Large-scale capital flight, both overt and covert, will continue in cycles, further depriving the economy of vitally needed direct investment capital.

This does not, however, mean that Russia is fated to verge toward bankruptcy as in the late 1980s and 1990s: Putin’s government has made heroic efforts to establish and maintain the solvency of the national government and its independence from foreign creditors. It has maintained control over the fuels sector sufficient to build up ample dollar and euro reserves. Faced with collapsing oil prices in 2014, the government artfully began an austerity program by reducing salaries of popularly loathed bureaucrats by 10 percent and shelved plans for long-term expansion of the armed forces. Putin’s government is clearly sensitive to popular wariness of budget cutting in the name of the national interest.

While Western sanctions work against the modernization of the Russian economy, we should not exaggerate their import. The sanctions do not touch on Russian exports of oil and natural gas to EU countries, Russia’s largest market by far. Revenues from European sales make upwards of 20 percent of the revenues of the Russian national budget and, even within the sanctions regime, Russia has been building a special energy relationship with Germany: A network of pipelines under the Baltic Sea ensures that Russian-German energy relations will be insulated from instabilities of Russia’s relations with neighbors like Ukraine and Poland, previously major transit zones for Russian energy to western Europe.

In addition, the closing off to Russian elites of avenues for medium- and long-term financial transactions in the West has made those elites even more dependent on Putin and his presidential administration, one of his long-desired goals. Whatever effects sanctions have had on depressing the standard of living of ordinary Russians, after four years they have not had any appreciable effect on Russia’s policy toward Ukraine, the ostensible ground for the sanctions in the first place.36 Domestic (or Asian) substitutes for many imports have been found and most Russians accept Putin’s explanation that the sanctions are the West’s punishment for Russia daring to assert its place as a great power.

In sum, we can expect that with Putin at the helm, the Russian government will remain capable of managing a slowly deteriorating macroeconomy with relative competence. This approach can prevent economic collapse while failing to address fundamental structural issues of which Putin and his closest financial advisers are keenly aware. These include:

Encouraging large-scale direct capital investment to replace the exhausted, Soviet-era economic infrastructure, including the inducement of the scores of thousands of successful, entrepreneurial Russians now residing in Western Europe and North America (perhaps 50,000 in Silicon Valley alone) to return to Russia with their human and financial capital;
Moving the political economy toward a more diversified profile, away from dependence of natural resources in general and fuels in particular;
Reducing corruption to simply abusive as distinct from corrosive levels;
Addressing an ongoing and increasing gap between the government’s social obligations to a rapidly aging population and a shrinking work force;
Escaping the effects of Western economic and especially financial sanctions, which implies a virtual revolution in Russia’s relations with EU countries and especially with the United States; and, relatedly:
Avoiding a resultant dependency on China, given the apparent disappearance of Russia’s Western option, as Russia seeks to modernize its own Far East territories.37
As difficult as any one of these challenges is, not to mention several of them taken together, they must be addressed while Putin is constrained by the passage of time to arrange for his eventual succession. He will turn 72 in 2024, when his next term as President, the last currently allowable under the Russian constitution, expires. Putin has rebuilt the Russian state, really an extension of his own network in the presidential administration, by freezing Russian politics solid. The forces needed to rejuvenate the Russian economy—liberal, cosmopolitan, entrepreneurial—are precisely those that Putin has excluded in favor of his militocracy and the chauvinist, xenophobic elements that remain powerful throughout Russian society. There may be time, if Putin begins now, to avoid the unenviable task of reforming the economy and the political order at the same time. Yet all of the evidence to date confirms that Putin simply does not trust Russians beyond the security forces and his old St. Petersburg network to make Russia work. Perhaps history is with him: Twice in the 20th century Russia attempted a liberal, Western-oriented political transformation (for eight months in 1917 and in the 1990s), and both times Russia suffered a catastrophic collapse. Yet if Putin does not begin this work soon, it will fall to others without his charismatic bond to the Russian nation and under increasingly unfavorable socioeconomic conditions. The scenario of essential continuity just outlined has an unpredictable but plausibly short expiration date:If Putin were to die or be incapacitated before his succession—not just his successor—has been established, Russian politics could assume some very novel forms.

If Putin were to die or be incapacitated before his succession—not just his successor—has been established, Russian politics could assume some very novel forms.

A last point: Even within this relatively optimistic projection, Russia will remain a minor economic force in the global economy. Russian GDP in 2017 amounted to $1.47 trillion, less than 8 percent that of the United States (at $19.36 trillion), with the lion’s share of that concentrated in the natural resources rather than high tech sector. When further compared to the GDPs of historical U.S. allies as well as that of China, it is difficult to envisage Russia emerging from its marginal international economic status any time soon.38

What about other, apparently improbable, scenarios?

Scenario 2. The Disintegration of the Russian Federation

Considering that ethnic Russians and Russified Slavs, according to the 2010 census, constitute more than 80 percent of the population of Russia (historically high compared with both the Russian Empire, less than 44 percent; and the Soviet Union, around 50 percent); that Putin has spent more than a decade eliminating even façade elements of true federalism; that major non-Russian regions like Tatarstan are themselves surrounded by the rest of Russia; that Putin has cultivated a resurgence in Russian nationalism throughout the country; and that an impressive range of military and para-military backers of Putin are likely prepared by now to govern the country to fill any emergent power vacuums, it is difficult to see where the impulse for the breakup of Russia might come from, absent defeat in a major war that its thousands of nuclear weapons are virtually certain to deter.

One possible trigger could be a major escalation of war in Ukraine. Putin, faced with such escalation in fall 2014, backed down, content to fuel a low-grade conflict that can only be settled if Russia agrees to it. But there are many in Russia who do not share Putin’s cold realism, his caution about overcommitment, and his keen awareness of Russia’s relative weakness in world affairs. Were Putin to disappear from the scene, and were the Russian military to seize decision-making clout, an Afghanistan or Vietnam might emerge on Russia’s western frontier, which now intersect with NATO’s. A Russia that exhausts itself in an attempt to subdue Ukraine would also be a Russia where the question of the competent command control of its nuclear weapons might again (as in the 1990s) be called into question.

Ironically, then, the United States has a vital interest in seeing that such control remains firmly within the grip of the Russian state, whether run by Putin, the Russian military, or some other authority. How much is settling the Ukraine conflict on terms that Russia finds acceptable (which is the only way that it can be settled) really worth?

Scenario 3. Bankruptcy

Some, like the late Karen Dawisha, have compared Putin’s Russia to a mafia state. Indeed, there are many similarities, not least Putin’s role as Godfather of Russia’s various elite networks. Yet there is also a key difference: For all of his faults, Putin has insisted throughout his tenure at the top that Russia always be able to pay its way and that it be prepared for the rainy day when commodity prices collapse.

Thus, by 2006 Russia had paid off its foreign sovereign creditors, in advance. When the global economy imploded in 2008, taking oil prices with it, Putin had amassed some $600 billion in foreign reserves in state coffers, the third largest in the world after China and Japan. With these, Russia rode out the shocks that had crippled Gorbachev’s and Yeltsin’s governments. When Russia began, slowly, to recover after 2010, Putin ensured that the state rebuilt its financial reserves and again, in 2014-15, his government and Russian society were able to ride out the collapse of oil prices. Government debt service is remarkably low by contemporary standards; in fact, too low, but Putin’s finance officials fear that too much of additional revenues will simply be siphoned off in corrupt and counterproductive transactions. If Putin’s regime were an actual mafia phenomenon, that is, an exclusively private protection and extortion racket, the sums that allowed the country to absorb the shocks of 2008 and 2014 would not have existed and Russia would have suffered the kind of bankruptcy that afflicted both Gorbachev and Yeltsin.

At the same time, were Putin to die tomorrow, or fail to institutionalize his system before the onset of a succession crisis, a struggle for power and wealth might siphon off the financial resources needed to weather another crisis. The magnitude of Russian economic decline over twelve months in 2008-09, when GDP dropped by more than 14 percentage points, is indicative in this respect: Russian elites in bed financially with the West have been able to take their capital out of Russia with remarkable speed. This likely explains why, in contrast, the Saudi economy, more than twice as dependent on fuels as Russia’s, actually grew by 1 percent in that year. A bankrupt Russia would return us to the situation in the 1990s, when the central government could no longer finance essential government functions, including the upkeep of the military, its nuclear materials infrastructure, and the borders.

From this point of view, it is once again clear that the outside world, including the United States, has a vital interest in maintaining the governability of Russia, by Putin or anyone else. In the short term, this means doing nothing to undermine Putin’s authority pending an eventual succession that he alone is in a position to arrange. In the longer term, this implies multilateral efforts to remove jurisdiction over weapons of mass destruction and their related infrastructure from purely national authorities. The Baruch Plan, at the beginning of the nuclear age, failed to accomplish this; but perhaps not all efforts are doomed to meet the same fate. The stakes could not be much higher: The half-life of plutonium is, after all, much longer than the oldest of continuous human civilizations, not to mention mere states.

Scenario 4. Emergence of a Democratic Alternative

Russia’s pro-Western liberal democrats were defeated in the 1990s, before Putin came to power. As they presided over the dismantlement of the state in favor of the “free market”—but without the institutional and attitudinal prerequisites that enable a market system to work—the Russian economy collapsed. Russia suffered a depression twice as deep as that afflicting the United States in the 1930s, even while hyperinflation wiped out most Russians’ life savings and purchasing power. In foreign policy, the liberals’ attempts to forge a meaningful partnership, if not outright alliance, with the United States were met by NATO expansion toward Russia’s borders, a process that remains in force today. By 1999, in the wake of NATO’s three-month air war against Russian client Serbia, the political destruction of Russia’s liberals was complete; pro-Western positions on politics and economics came to be seen as incompatible with Russia’s core national security interests. Russia’s dwindling band of liberal democrats concluded that Bill Clinton had betrayed them. They confused betrayal with cluelessness.

The legacy of the 1990s remains a powerful force supporting both Putin’s legitimacy and the predominant anti-Western tendency in Russian politics and society today. Additional efforts by Putin’s machine to marginalize Russia’s liberals—by tweaking thresholds for representation in parliament, monopolizing national television news and political coverage, changing registration requirements for political parties at convenience, selectively harassing opponents, and more—have effectively eliminated them as a competitive political element. When liberal Boris Nemtsov was murdered outside the Kremlin in 2015, neither he nor the movement that he represented presented any viable threat to Putin’s grip on power, casting doubt on those who pointed the finger at the Kremlin for his murder.

The one leader that Putin’s network genuinely fears, 42-year old Alexei Navalny, is no liberal.

The one leader that Putin’s network genuinely fears, 42-year old Alexei Navalny, is no liberal. Rather, Navalny is a charismatic populist who has seized on the most explosive issue in Russian politics, the one that everyone knows has the potential to bring down Putin’s house of cards: the massive governmental corruption that most Russians deal with every day of their lives. His Russian nationalism informed his embrace of Putin’s seizure of Crimea and thereby makes him an even more credible alternative. No one in Putin’s government, save possibly 63-year old Defense Minister Sergei Shoigu (formerly the highly visible Minister for Emergency Situations), can appeal to as broad a public as can Navalny. Navalny, who has led countless protests against the government and is highly skilled in the political use of social media, has been repeatedly arrested and even seen his brother arrested as a hostage after one of his releases from jail. Nevertheless, Navalny was able to obtain 27 percent of the vote in the 2013 election for mayor of Moscow (won by Putin’s ex-chief of staff Sergei Sobyanin with a suspicious 51 percent).

Should Putin falter in arranging his own succession and in the ensuing struggle for survival the militocracy splits (see Serbia, 2000; Romania, 1989), an alliance between one faction and Navalny is imaginable because of the popular legitimacy he could confer on a post-Putin coup d’état. The price that Navalny would demand—nationalizing the ill-gotten gains of Putin’s clients—would require a massive purge of established elites. Can he thus be allowed to live long enough to influence the post-Putin succession?

The point is that, even in the event that a Navalny-like figure comes to power, Russia would remain far from liberal and still suspicious, at best, of the West in general and the United States in particular. The most likely, and likely least dangerous, alternative to the Putin machine would be a regime with its foundation in one faction of the militocracy, allied with the Orthodox Church and a charismatic public figure like Navalny or Shoigu to give it popular legitimacy. This sounds a lot like the Spain that emerged under Franco after 1939.

Implications for the United States

With the United States now arming the government of Ukraine, whose northeast border lies some 400 indefensible miles from Moscow, there are no political incentives in Russian politics for giving the United States the benefit of the doubt, or even of compromise. The reverse, of course, has been true for some years now in the United States. And Putin’s interventions in the November 2016 election, such as they were and for whatever reason they were taken, have acted as a self-fulfilling prophecy: The bipartisan consensus in Washington now is that there can be no progress in U.S.-Russian relations so long as Putin is in power.

But Putin in power may be the best that the United States can hope for. Every other scenario, plausible and less plausible, seems more unpredictable and even dangerous. Maybe it is time to start thinking about how to give the Russians something to hope for. For example, the cost of holding the indefinite future of U.S.-Russia relations hostage to Crimea seems wildly excessive given the contingencies stretched out over time that could imperil both nations. Short of the headlong collapse of the Russian state—which would actually be a disaster for U.S. and global security—there is no plausible route to severing Crimea from Russia. So why not consider a trade greased by the salve of a professional diplomacy: de facto U.S. acquiescence to the reintegration of Crimea into Russia in return for Russia’s leaving the rest of Ukraine alone, pending a suitable and achievable compromise over Ukraine’s geostrategic status and internal language and identity issues. If Russian-Ukrainian relations remain a powder keg when Putin has left the scene, Americans may well come to regret that they passed on exploring an outcome that Putin could agree to.

1 The remarks are not included in the official written version of Roosevelt’s speech but can be clearly heard on newsreel films of the speech. Speaking during a Fireside radio chat on Christmas eve, 1943, shortly after his Tehran summit with Churchill and Stalin, Roosevelt declared, “I believe that we are going to get along with [Stalin] and the Russian people—very well indeed.” Franklin Delano Roosevelt, “Address to the Nation,” December 24, 1943.

2 For a discussion, see V.A. Gaitone, “An Answer to the Theory of Convergence,” Social Scientist, vol. 3, no. 5 (December 1974), pp. 38-51; for a Soviet version, see Andrei D. Sakharov, Thoughts on Progress, Peaceful Coexistence and Intellectual Freedom (The New York Times, 1968).

3 For a representative example, see Seweryn Bialer and Joan Afferica, “Reagan and Russia,” Foreign Affairs, vol. 61, no. 2 (Winter 1982), pp. 249-271.

4 Max Fisher, “Robert Gates Was Wrong on the Most Important Issue He Ever Faced,”  Washington Post, January 7, 2014.

5 Strobe Talbott, The Russia Hand. A Memoir of Presidential Diplomacy (Random House, 2002), pp. 37-71.

6 Ibid., pp. 121-146.

7 Igor Birman, “The Soviet Economy: Alternative Views,” Survey, vol. 29, no. 2 (1986), pp. 102-115; Vasily Selyunin and Grigory Khanin, “The Elusive Figure,” translated in Current Digest of the Soviet Press, vol. 39, no. 25 (1987), pp. 10-12.

8 See the chapter entitled, “Illusions of Knowledge,” in Philip Tetlock and Dan Gardner, Superforecasting: the Art and Science of Prediction (Broadway Books, 2015), pp. 24-45.

9 Allen C. Lynch, Vladimir Putin and Russian Statecraft (Potomac Books, 2011), pp. 65-118.

10 Richard Sakwa, Stephen White, and Henry Hale, eds., Developments in Russian Politics 8 (Duke University Press, 2014), pp. 19-59.

11 Karen Dawisha, Putin’s Kleptocracy: Who Owns Russia? (Simon & Schuster, 2015).

12 Unless otherwise noted, data for this and subsequent economic indicators for Russia come from the Trading Economics website, https://tradingeconomics.com/russia/indicators.

13 In 2009, Russian economist Mikhail Deryagin stated: “Russia has almost no other industry and infrastructure except for those inherited from the Soviet Union.” Mikhail Deryagin, “Tyuning ‘sovka’” [A tuning fork], Novaya Gazeta, August 21, 2009.

14 Martin Malia, The Soviet Tragedy (Free Press, 1994), pp. 390-401.

15 James R. Arnold and Roberta Wiener, eds., Cold War. The Essential Reference Guide (ABC-CLIO, 2012), p. 372.

16 Benchmark OPEC prices averaged an historically high $107 per barrel for three years from 2011-2013. See Average Annual OPEC Crude Oil Prices from 1960 to 2018 at www.statista.com.

17 Estonian banks handled $1 trillion in cross-border capital flows between 2008-2015; the country’s entire GDP for 2017 was less than $30 billion.  In Latvia, the figure was $3 trillion and in Cyprus, nearly $4 trillion. See Ott Ummelas, “Banks in Estonia Handled $1 Trillion in Flows, Dwarfing Danske,” Bloomberg, October 3, 2018.

18 Vladislav Zubok, A Failed Empire: The Soviet Union in the Cold War from Stalin to Gorbachev (The University of North Carolina Press, 2007), pp. 241-242.

19 Ibid., pp. 265-278.

20 Simeon Djankov, “Russia’s Economy under Putin: From Crony Capitalism to State Capitalism,” Policy Brief, No. PB15-18 (Petersen Institute for International Economics, September 2015), p.3.

21 Typically, oil and natural gas exports make up about two-thirds of Russia’s total export-generated revenues. See “Oil and Gas Sales Accounted for 68% of Russia’s Total Export Revenue in 2013,” as reported by the U.S. Energy Information Association, July 23, 2013.

22 Halia Pavliva and Vladimir Kuznetsov, “Prosperity Adds More Gazprom as Putin Pushes Improvement,” Bloomberg, March 7, 2013, and Margarita Assenova, “Russian Energy Review in 2012: Consolidating State Control in an Uncertain Market,” Jamestown Foundation, January 18, 2013.

23 “Odobreniye organov vlasti” [Authorities’ approval rating], Levada Center.

24 Levada Center data going back decades is available from their bilingual website www.levada.ru. The definitive work to date is Richard Rose, William Mishler, and Neil Munro, Popular Support for an Undemocratic Regime: The Changing Views of Russians (Cambridge University Press, 2011).

25 Ronald Asmus, A Little War that Shook the World: Georgia, Russia, and the Future of the West (St. Martin’s Press, 2010), pp. 168-169.

26 Sakwa, White and Hale, pp. 231-246.

27 Ibid., pp. 60-116.

28 “Russia’s Constitutional Structure: Federal in Form, Unitary in Function,” European Parliament Think Tank, October 20, 2015.

29 Emil Aslan Souleimanov and Grazvydas Jasutis, “The Dynamics of Kadyrov’s Regime Between Autonomy and Dependence,” Caucasus Survey, vol. 4, no. 2 (2016), pp. 115-128.

30 See “Russia Government Debt: % of GDP,” at www.ceicdata.com and “Russian Federation Trade Statistics,” at wits.worldbank.org.

31 G.P. Lannon, “Russia’s New Look Army Reforms and Russian Foreign Policy,” Journal of Slavic Military Studies, vol. 24, no. 1 (2011), pp. 26-54.

32 Levada Analytical Center, Russian Public Opinion (Moscow, 2013), pp. 94-96.

33 Michel Eltchaninoff, Inside the Mind of Vladimir Putin (Hurst & Co., 2018), trans. James Ferguson.

34 Marvin Kalb, “Why Putin Needs a Praetorian Guard,” Brookings, May 3, 2017.

35 Djankov, p.6.

36 Emma Ashford, “Not-so-Smart Sanctions: The Failure of Western Sanctions Against Russia,” Foreign Affairs, vol. 95, no. 1 (January-February 2016).

37 For an influential Russian foreign policy advisor’s view of the country’s eastern options in the face of Western refusal, see Sergei Karaganov, “K Velikomu okeanu” [To the great ocean], Rossiya v global’noy politke [Russia in Global Politics], September 25, 2018.

38 “Gross Domestic Product (GDP) Ranking by Country, 2017” at www.statista.com.

Published on: October 25, 2018
Allen C. Lynch is professor of politics at the University of Virginia and the author, most recently, of Vladimir Putin and Russian Statecraft (Potomac Books, 2011).