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Friday, December 13, 2019

Russia Crossroads


Under Putin, Russia is facing a crossroads.

It is an historic choice facing the country today.

One road can lead to a prosperous country with a first class military, a benign influence on world affairs and a growing economy.

Another road can lead to the opposite: an economy declining into poverty, exportation of corruption and violence and an irrelevant military presence.

Several trends are leading Russia toward the choice.

The financial exploitation of the country by the Oligarchs has forced Russian households to tighten their budgets: '...[while] the economy today shows signs of stability following the financial crisis of 2014-2016....the financial crisis left its mark on Russian households—personal finances are tight and inflation has outpaced income growth. As consumers adjusted over the past decade to that new economic reality, they’ve grown more cautious, pragmatic, and value-conscious.' [https://www.bcg.com/en-us/publications/2018/russian-consumers-new-economic-reality.aspx]

Russian family incomes are higher than China's, but lag behind both the EU and the USA.

'Economic recovery masks structural problems in the economy. Russia's  current  economic  growth  of  under  2 %  is  not  particularly impressive compared to the rates of 2.3 % and  2.7 %  registered  in  the  United  States  and  the  EU respectively, or the global average of 3.8 %; it is even further  below  the  7 %  averaged  during  Russia's  early  2000s'  economic  boom.  Anemic  growth  means  that  Russia's   share   of   the   global   economy   is   gradually   declining,  and  the  lag behind  the   more   advanced   economies,  which  had  been  narrowing  till  2014,  has started  widening  again,  causing  the  country  to  fall  further and further behind. The recession of 2015-2016 and the slowness of the recovery   since   then,   have only   partly   to   do   with   external factors (Western sanctions, a drop in the price of oil). The  fact  that  economic  growth  was  already starting to run out of steam in 2012, long before either of these two external factors came into play, suggests that Russia has longer-term internal problems holding back the economy.'[http://www.europarl.europa.eu/RegData/etudes/IDAN/2018/625138/EPRS_IDA(2018)625138_EN.pdf]

This low consumer purchasing power contributes to the country's economic weakness.

Another factor relates to the combination of weak oil markets - read under or near $50 per bbl - and Putin's choice to make the oil industry the country's sole foreign exchange earner. [BLOWOUT, Rachel Maddow, CROWN, New York, 2019] Further, Russian oil reserves are changing from easily extractable fields to fields which require advanced western technology to access. US embargoes on that technology will continue to weaken oil production and consumer incomes.

Symptoms of this weakness are the cancellation of orders for the new, but expensive, plane, the Sukhoi Su-57 as well as the cancellation of Aeroflot order for 22 Boeing 787's [https://www.reuters.com/article/us-boeing-787-orders/boeings-787-under-pressure-as-russias-aeroflot-cancels-order-idUSKBN1WO2N8]

Another symptom is the surprising Russian support for continuing the nuclear arms reduction treaty which has been opposed by trump.

Even though 'Putin said Russia will start work on creating new missiles, including hypersonic ones, and told ministers not to initiate disarmament talks with Washington, accusing the United States of being slow to respond to such moves.' [https://www.reuters.com/article/us-russia-usa-nuclear/russia-suspends-nuclear-arms-treaty-after-u-s-says-to-pull-out-idUSKCN1PR06T]

BUT, Lavrov expressed support for continuing the treaty in his recent visit to Washington, DC. 'Washington “is evading any serious discussion, making public discouraging signals regarding the future of this treaty,” said Russian Foreign Minister Sergey Lavrov Nov. 8 at a nonproliferation conference in Moscow. Lavrov’s deputy, Sergey Ryabkov, voiced similar criticisms at the conference saying, “[It] looks as if the United States is dragging its feet, if not downright, looking for an excuse to get rid of New START right after tearing up the [Intermediate-Range Nuclear Forces] Treaty.”'[https://www.armscontrol.org/blog/2019-11-15/us-russian-nuclear-arms-control-watch]

A possible explanation for this waffling and confusion is that the Russian economy cannot support the expensive programs it needs to keep up with Western armed forces.

Internally, Russian citizens continue demonstrating and rioting against Putin's government. [https://en.wikipedia.org/wiki/2017%E2%80%932018_Russian_protests]. A triggering event was Putin's action to raise the retirement age for pensioners, forcing them to work longer.

The reaction of the Russian government to these protests has been to exercise even stricter control. In practice, this has meant assassination of critical journalists, assassination of Putin critics who were former Russian security employees, killing of perceived enemies in London and Paris, harsh treatment of Islamist minorities and banning social media platforms from access to Russian citizens [https://www.forbes.com/sites/zakdoffman/2019/09/13/putin-now-plans-100-facebook-instagram-and-youtube-bans-russians-warned/#730d1eaa57ff]. 

Externally, Putin has installed a comprehensive cyber war against Western democracies, seemingly in the hope that weaker Western democracies will make the West less hostile toward Russia.

History warns us that repressive regimes usually face violent revolutions. But it also suggests that non-violent means of achieving real change are more effective [https://wagingnonviolence.org/2012/03/the-more-violence-the-less-revolution/]

Regardless, the message is clear: change will be forced on Russia by popular discontent, violently or otherwise.

Putin has two choices: Choice 1 is to suppress the discontent violently while continuing to keep citizen purchasing power low through oligarch monopolization of business and profits. That course will lead, IMHO, to a likely violent effort toward social change with many casualties. This outcome will diminish both the economy and the ability of Russia to project power or influence.

Choice 2 may lead to a better outcome. This choice may involve  Putin's embrace of the change that will be forced upon Russia. Such an embrace would ensure that Putin's mark on history will be positive: tyrant changes to benign ruler.

Here are some specific actions he can take to create a real path:.

*  Remove the oligarchs from their monopolization of financial wealth,

* adopt European Style regulation and property rights and

* create real free elections.

This choice will likely lead to a better economy together with a stronger military and more benign internal and external policies. In plain words - no more invasions of foreign countries or military rule over dissidents.

It is also possible that the second path MAY, with other Russian concessions, lead to a relaxation of the Western embargo on drilling technology.

Concessions might include:

*agreement to cease, and actual cessation of,  the cyber-war currently under way against Western democracies,

* agreement to stop further armed invasions and withdrawal from Ukraine,

* auctioning of all oligarch owned properties and companies

* nationalization into a non-profit entity the entire natural gas industry and properties,

* installation of EU style property rights and protections,

* cessation of media suppression with encouragement of free press and broadcast media and,

* perhaps initially, installation of fair and free elections.

Well, one can wish, after all.




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