THE INSIDERS: Not a Cold War, but more than a little chilly

By bne IntelliNews August 29, 2013

George Friedman of Stratfor -

Stratfor has been chronicling what we call the end of the Post-Cold War world, a world with three pillars: the United States, Europe and China. Two of these three have been shifting their behaviour over the past few years. We've discussed the end of China's high-growth, low-wage expansion. We've also discussed the deep institutional crisis in Europe resulting from its economic problems. We have discussed some of China's potential successors. What needs to be discussed now is the system that will emerge from the Post-Cold War world, and to do that, we need to discuss shifts in Russia's behaviour.

Chaos in Russia

Russia went through two phases in the Post-Cold War world. The first was the chaos that inevitably followed the collapse of the Soviet Union. Chaos sometimes can be confused with liberalism and many think of Russia in the decade after the Soviet Union as being liberal. But Russia under Boris Yeltsin was less liberal than chaotic, with a privatization programme that enriched those who rapidly organized to take advantage of the poorly defined process, a public life that had little shape or form and a West that was both pleased with the fall of Soviet power and deluded into thinking that Russia was reshaping itself into a Western constitutional democracy.

The second phase was a reaction to the first. The havoc of Yeltsin could not continue. To a great extent Russia was not working. The only structure that had survived the Soviet Union and that was still working was the security services - and even those were being seriously degraded by Yeltsin's efforts. The security services had both held the country together to the extent possible and had participated in the accumulation of wealth through the privatization process. In the course of that, they not only retained the power they had in the Soviet Union but also dramatically increased their power. At the same time, a class of oligarchs emerged and the two groups oscillated between competition and cooperation.

Russia could not continue as it was. It was sinking into extraordinary poverty, worse than the Soviet Union; there were regions that were seeking to break away from the Russian Federation; and it had little to no international standing. Influence is not something given to a country. It has that influence because of its power, because the consequences of ignoring its wishes would have unacceptable consequences. By 1999, Russia had reached the low point of its influence.

Russia's return

It was logical that a man like Vladimir Putin would emerge from the chaos of the 1990s. Putin was deeply embedded in the KGB and the old security apparatus. During his time in St Petersburg, he was integrated with the emerging oligarchs as well as the new generation of economic reformists. Putin understood that in order to revive Russia, two things had to happen. First, the oligarchs had to be intimidated into aligning their activities with the Russian government. He also understood that he had to bring some order to the economy both for domestic and foreign policy reasons. Russia had massive energy reserves, but it was incapable of competing on the world markets in industry and services. Putin focused on the single advantage Russia had: energy and other primary commodities. To do this he had to take a degree of control of the economy - not enough to return Russia to a Soviet model, but enough to leave behind the liberal model Russia thought it had. Or put differently, to leave behind the chaos. His instrument was Gazprom, a government-dominated company whose mission was to exploit Russian energy in order to stabilize the country and create a framework for development. At the same time, while reversing economic liberalism, Putin imposed controls on political liberalism, limiting political rights.

Energy production created an economic base that the government could use to end the erosion of economic life throughout the country. It also gave Russia a lever that assured it would not be ignored. Energy sales to Europe became an essential part of European economic life. Germany, for example, needed energy to maintain its economy. There was always a chance that Russia might cut off sales. On several occasions, the flow of energy was severed when disagreements arose between Moscow and the transit states, Belarus and Ukraine. As the Russians developed greater reserves it became easier for them to endure the cost of a month-long disruption than it was for Germany.

Therefore, Germany and the rest of Europe ceased to be indifferent to what Russia wanted. They couldn't afford to neglect Russian interests. During the Cold War, Russia had been poor and powerful. After the Cold War, it had been poorer and powerless. Putin returned it to a place where it was somewhat better off and had international power. That he was indifferent to individual rights upset urban liberals in Russia. Its effect outside of Moscow and St Petersburg is less clear, but his popularity continues to be greater outside major cities.

As Europe struggles with its internal problems and China deals with its economic problems, Russia has attained a position of significant regional influence -influence that Putin is systematically trying to increase. Putin is following a policy that we might call "commercial expansionism." Russian tanks are not about to surge into the former Soviet satellites in Europe like they did in Georgia, but the weakness of Europe has forced these countries to rely less on the rest of Europe and to try to cope on their own. Unable to rely on the US, where the single issue of missile defence has created substantial unease, they remain distrustful of Russia in the extreme. However, they have few options, and the Russians are being meticulous in assuring that commercial relations are not seen as a means of political control.

This strategy creates a new dynamic in Russia's relationship with the US. During the Soviet era and under Putin, the Russian strategy toward the US has been to generate problems in diverse areas in order to force US actions that diffuse American power and lead Washington to overcommit. Vietnam was an example of this. For Putin, the sphere for this action is the Middle East. The wars in Afghanistan and Iraq were gifts to the Russians. The Americans were tied down, creating a window of opportunity for the Russians to recover their balance, rebuild their system and, when the opportunity presented itself, expand their power.

The end of the wars in Afghanistan and Iraq are not in the Russian interest. Moscow benefits, with some costs, from the US preoccupation in the Islamic world. Therefore, the Russians have played a role in both Syria and Iran, essentially inviting the Americans to continue their policy in the Middle East while relieving pressure on the Russians. The US has responded with increased pressure on the Russians to halt support for Bashar al Assad and the Iranians. The Russians refused.

New Cold War

When you step back, you see the US in the process of disengagement that normally follows American wars. This disengagement comes at the same time that Europe is undergoing an internal economic crisis that has created an institutional crisis. This has opened opportunities for the Russians to increase their influence in Europe at a time when the US is trying to find its own balance.

The Snowden affair should be seen in this light. There are many issues involved in the Snowden case, from US constitutional matters to the obligations of those with clearances. The Snowden affair also has this context: An American with access to highly classified materially has defected to Russia. The Americans want him back. Ten or 15 years ago he might have been returned, but not now. If the Russians returned him, all other potential American defectors might decide not to trust Russia. If an equivalent Russian defected to the US, it is unlikely he would be returned to face trial. But the defection would be much more quiet, as the less the Russians knew the better. For reasons perhaps beyond their control, or perhaps not, this defection cannot be hidden.

But that serves two purposes. First, it creates a political crisis in the US and between its allies. Second, it aligns Russia with human rights groups (international and inside of Russia itself) that have been condemning Russia for violating human rights. Russia has created a moral equivalency on human rights with the US, valuable in its political war with the US. The Snowden affair is on this level a minor matter. But there are no opportunities too minor to be exploited now.

There is no danger of a military confrontation now or perhaps ever. But the Russians are now using the European economic crisis and tensions between Europeans and Americans to project power - commercial, in this case - into Europe, to separate the Europeans from the Americans to the extent possible and to put the US on the defensive.

The US not yet defined its policy toward Russia. It continues to look at Russian behaviour in the context of isolated actions that do not form a coherent whole. Syria, Iran, Eastern Europe and Ecuador are viewed as Russian irritants, not a Russian strategy. But it is now a strategy - a strategy of finding the means to tie down and divert the US while Russia creates a new reality on its periphery and especially in Europe.

The US can afford to be confused. It is a huge power with ample time to react. Russia is ultimately a weak power. Its advantage in energy depends on the price of energy and the development of alternative sources and customers of energy. Russia's reassertion rests on a very weak foundation and I doubt that they can sustain their play. The Soviet Union was much stronger on the whole than Russia is today, and it could not sustain itself. Neither can Russia.

But for now, it has a powerful play. What Latin American leftists do is really not very important. And the US what the Russians are doing in Eastern Europe could transfigure Europe sufficiently to challenge American interests. It is hard to ignore it. It is also hard to react to it. This is the American problem. For now, the US has no good options.

This is one of the reasons President Barack Obama is considering cancelling the September summit with Putin. Snowden is the excuse and a piece of it, but it's not just that. The US is in the process of coming to terms with the fact that Russia is an adversary waging a well-reasoned and effective strategy within the limits of its resources, one for which the US has no clear counter. The last summit achieved nothing, nor will this one.

"In The Next 100 Years", I laid out a sequence in which Europe and China weakened. I argued that the power that would emerge from this weakening would be Russia, that Russia would wind up in a little Cold War with the US and that Russia's ability to sustain itself for a generation really isn't there. But I saw this as still the most significant successor to the Post-Cold War world. I think we are there. It is not a Cold War, but it is more than a little chilly. And it will become a central feature of the international system.

A full version of this article can be found on

George Friedman is the founder and CEO of Stratfor.

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.