Mark Galeotti of New York University -
Contrary to some Western hopes and the more feverish rumors within the Moscow intelligentsia, there is no imminent threat to Russian President Vladimir Putin. However, his rule is strong but brittle, and a combination of systemic pressures are eating away at the regime’s social, economic, political and geopolitical reserves. This will leave the Kremlin much less able to weather future shocks and unexpected turnarounds. As a result, 2015 will be dominated both by efforts to protect and restore those reserves and also the uncertain lurch from threat to crisis.
It is clear that the Kremlin did not anticipate the implications of its Ukrainian adventures. The Crimean land grab was a piece of inspired opportunism, taking advantage of ideal conditions, including a distracted and uncertain new government in Kyiv. While the decision was spur of the moment, the plans had been long drawn-up. However, the lack of even token resistance encouraged Putin to go further and intrude into so-called “Novorossiya.” This had not been gameplanned militarily or politically, and mired Russia in a conflict in which defeat is unthinkable, but victory — without a massive escalation — appears unwinnable.
Crimea was an expensive piece of real estate, not in the capture but in the harmonization to Russian standards. All the costs are magnified by the wider economic crisis brought about by the slump in oil prices, and hardly helped by the unexpectedly (for Moscow) deep and enduring Western sanctions. After all, the Kremlin had banked on a re-run of the response to the 2008 incursion into Georgia: a few months of splenetic rhetoric and then a “re-set.”
As it was, 2014 thus saw Russia battered by a perfect storm of macroeconomic, military and political pressures. This is inevitably having an impact on the finances of state and public alike. Reserves have fallen from $510.5bn at the start of 2014 to $388.5bn by the end, largely because of efforts to sustain the ruble. This is still a respectable stash, but when one considers the accounting sleight of hand that means “rainy day” funds are included, then Russia’s external debt obligations over the next two years alone will consume these reserves.
The government has introduced a 10% cut across most government departments (although the military and security agencies have so far been protected), which across 2015 will begin to have an effect on public services. Even the military, though, is beginning to have to come to terms with potential future budget cuts, with long-term projects such as the roll-out of the PAK DA strategic bomber already being earmarked for delay.
However, the bulk of cuts will be in public services and this will begin to have an impact on life for most Russians over time. Just as the ruble’s tumble has not led to immediate and dramatic changes in most people’s lives but instead a slow constriction as prices rise faster than wages, so too these cuts in state funding will manifest themselves gradually over time.
This strikes at the very heart of Putin’s implicit social contract with the Russian people: political quiescence in return for a steadily improving quality of life. Russians under Putin have lived better than Russians have at any point in their history and it is this, rather than national glory or even his bare-chested mythology, that explains the very real esteem in which he is generally held. However, as that social contract begins to be broken, Russians may begin to express their discontent, at least with the situation, even if not yet with Putin himself.
More serious will be the pressures on the separate bargain struck with the elite: loyalty for the opportunity to live a good life, not least through embezzlement and corruption. Either the Kremlin will have to attempt to force a renegotiation of the “acceptable limits of corruption,” or else it will have to continue to swallow a practice that consumes possibly as much as a quarter of Russia’s GDP.
This will sharpen and trigger intra-elite feuds, of the sort that have flared up periodically through Putin’s era, over access and assets. The long-running scandal over the Interior Ministry’s economic crime division — as the Federal Security Service and Investigations Committee try to take over this lucrative portfolio — and the arrest of Vladimir Yevtushenkov and dismemberment of AFK Sistema are likely signs of things to come.
China as loanshark
Meanwhile, Russia’s geopolitical situation is also parlous. However much it may try to present China as an ally, its ruthless negotiations over credits and energy supplies show Beijing is not so much Moscow’s banker as its loanshark. When even Belarus is trying to distance itself — President Alexander Lukashenko acidly told newly-appointed Prime Minister Andrey Kabyakau that, “yes, Russia is our brother, our friend. But you see how they behave lately” — then it is time for Russia to acknowledge its dearth of reliable allies.
Finally, even the internal resources of the Russian leadership — imagination, decision, wisdom — appear tapped out. Crimea proved a strategic blunder, “Novorossiya” doubly so. The response to the economic crisis has been hamfisted, incoherent and often ad hoc. The decision to suspend a custodial sentence for opposition darling Alexei Navalny while imprisoning his brother on questionable fraud charges looks like a brutal act of hostage-taking and seems to have angered, not cowed their real target.
It is important to stress that this does not in itself mean some imminent threat to the regime. Instead, it means that its capacity to weather shocks and challenges becomes increasingly limited. This could be anything: a resurgence and expansion of Navalny’s protest movement, open clashes within the elite, a financial scare, an upsurge in terrorism or even health problems for Putin. The point is that stuff happens. The measure of a government is its capacity to respond to the unexpected, and the intellectual, political and social reserves on which it can draw to do so.
With the Kremlin increasingly lacking in ideas and strategy and its resources running low, 2015 is likely to be a tense, dangerous year for Russia. Putin must just hope for, well, not too much stuff to happen.
Mark Galeotti is Professor of Global Affairs at the Center for Global Affairs, School of Professional Studies, New York University, who writes the blog In Moscow’s Shadows (http://inmoscowsshadows.wordpress.com/)
bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more
bne IntelliNews - The Council of the European Union (EU) has suspended for four months the asset ... more
Henry Kirby in London - Central and Eastern Europe and the Commonwealth of Independent States’ (CEE/CIS) countries performed particularly well in the World ... more