Lauren Goodrich – Economy Watch

Russia’s Roulette: Will Moscow Risk Its Relationships With The US & Europe?

Lauren Goodrich — Thu, 15 Dec 2011 08:41:20 +0000

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Russia appears to be playing a dangerous game in its relationships with the US and Central Europe. Moscow’s strategy involves using crises with the United States to create uncertainty in Central Europe and to make the Europeans uncomfortable over perceptions that the United States has forced Russia to act the way it is acting. But, if Moscow takes its aggressive moves too far, it could spark a backlash from both sides.

Tensions between the United States and Russia have risen in the past month over several long-standing problems, including ballistic missile defense (BMD) and supply lines into Afghanistan. Moscow and Washington also appear to be nearing another crisis involving Russian accession to the World Trade Organization (WTO).

The crises come as Washington struggles over its many commitments in the world and over whether to focus on present events in Afghanistan or future events in Central Europe. Russia has exploited the US dilemma, using its leverage in both arenas. However, if Moscow takes its aggressive moves too far, it could spark a backlash from the United States and Central Europe.

The Persisting Disagreement over BMD

The US BMD scheme for Europe has long been a source of US-Russian tensions. Washington argues that its European BMD program aims to counter threats emerging from the Middle East, namely Iran, but its missile defense installations in Romania and Poland are not slated to become operational until 2015 and 2018, respectively, by which time Russia believes the United States will have resolved its issues with Iran. Moscow thus sees US missile defense strategy as more about the United States seeking to contain Russia than about Iran. Moscow does not fear that the United States is seeking to neutralize or erode Russia’s nuclear deterrent, however; the issue is the establishment of a physical US military footprint in those two states — which in turn means a US commitment there. Romania and Poland border the former Soviet Union, a region where Russia is regaining influence.

Russia previously pressured key states in the Bush-era BMD scheme, such as Poland and the Czech Republic, to reconsider acceding to such plans. This assertiveness peaked with its 2008 invasion of Georgia, which both proved that Moscow was willing to take military action and exposed the limits of US security guarantees in the region. The Russian move in Georgia gave the Central Europeans much to think about, prompting some attempts to appease the Kremlin. Still, these states did not abandon all faith in the United States as a strategic counter to Russia.

[quote]Russia has since shifted its BMD strategy. Instead of categorically opposing the plan, Moscow proposed a cooperative, integrated scheme. The Kremlin reasoned that if Iran and other non-Russian threats were the real reason for expanding missile defense, then Russian involvement — which would strengthen the West’s defenses — would be welcomed. [/quote]

Russia’s BMD capabilities span the Eurasian continent, though their practical utility to and compatibility with US systems is questionable. This plan was seen as a way to take a more conciliatory approach with the same end goal: blocking the placement of US troops in Eastern Europe.

The United States and most of NATO refused Russia’s proposals, however, leaving the door open for the Kremlin to introduce a new defense strategy, which Russian President Dmitri Medvedev outlined Nov. 23. Medvedev emphasized that Russia had exercised the “political will” to open a fundamentally new chapter in relations with the United States and NATO, only to have the United States spurn the offer. US resistance to Russian inclusion in the BMD system forced Moscow to make other arrangements to counter US plans in Central Europe — precisely the outcome it had hoped for.

Medvedev also said that if the United States continues to refuse BMD cooperation with Russia, Moscow would carry out plans for the deployment of the Iskander mobile short-range ballistic missiles and the activation of an early-warning radar system in Kaliningrad, a Russian exclave on the Baltic Sea that borders NATO members Poland and Lithuania. He said Russia also would consider the deployment of other Iskander systems, particularly along his country’s western and southern borders, and would hasten to fit its ballistic missiles with advanced maneuverable re-entry vehicles and penetration aids, a process that has long been under way. The prospect of Russian strategic weapons targeting BMD facilities was also raised. Medvedev added that more measures could be implemented to “neutralize the European component of the US missile defense system,” concluding that all these steps could be avoided in favor of a new era of partnership between the United States and Russia if Washington so desired.

The US Dilemma

The United States was expected to respond to Russia’s renewed strategy during the Dec. 8 meeting between NATO and Russian foreign ministers in Brussels. US Secretary of State Hillary Clinton avoided doing so, however, reiterating that the BMD scheme was about Iran, not Russia. Clinton’s move highlights the dangerous US position with regard to Russia. Washington has no intention of abandoning its commitment to Central Europe in the face of a resurging Russia, but commitments elsewhere in the world may prevent the United States from resisting Russia in the short term.

At present, Washington is struggling to halt the deterioration of relations with Pakistan, which have reached a new low after a US helicopter strike on the Afghan-Pakistani border killed some two dozen Pakistani servicemen. After the strike, the Pakistanis forbade the shipment of fuel and supplies for the NATO-led war effort in Afghanistan across the Pakistani border, leaving the United States and its allies wholly dependent on the Northern Distribution Network, at least temporarily. Moscow used this as an opportunity to remind Washington that it could cut this alternative route, leaving NATO and the United States in a catastrophic position in Afghanistan — a move tied directly to Russia’s negotiations over missile defense.

While Russia has used previous threats against US interests, such as increased support for Iran, as leverage in its BMD negotiations, its present threat marks a new dynamic. Washington called Moscow’s bluff on its threatened support for Iran, knowing Russia also did not want a strong Iran. But it cannot so easily dismiss the specter of interrupted supplies into Afghanistan, as this puts more than 130,000 US and allied troops in a vulnerable position. Consequently, the United States must work to mitigate the BMD situation.

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American Olive Branch or New Crisis?

In recent months, the United States has cultivated one potential olive branch to defuse short-term tensions. Previously, there was little the United States could offer Russia short of abandoning US strategy in Central Europe. When tensions escalated in 2009 and 2010, the United States offered to facilitate large economic deals with Russia that included modernization and investment in strategic sectors, mainly information technology, space and energy. Since Russia had just launched its sister programs of modernization and privatization, it jumped on the proposal, reducing tensions and eventually joining US initiatives such as sanctions against Iran. Now, the United States is extending another carrot: WTO membership.

Russia has sought WTO membership for 18 years. Even though it has the 10th largest economy in the world, it has failed to win accession to the 153-member body. Though the country’s extreme economic policies have given members plenty of reason to exclude Russia, the main barriers of late have been political. [quote]For its part, Moscow cares little about the actual economic benefits of WTO membership. The benefits it seeks are political, as being excluded from the WTO made it look like an economically backward country (though its exclusion has given it a convenient excuse to rail against the United States and Georgia).[/quote]

As Russia sorted through its economic disputes with most WTO members, Georgia alone continued to block its bid because of the Russian occupation of the disputed Georgian territories of Abkhazia and South Ossetia. In recent months, Georgia has dropped its opposition under US pressure — pressure that originated from Washington’s need for something to offer the Russians. With all obstacles cleared, the WTO should approve Russia’s candidacy Dec. 15-16, apparently giving the United States the olive branch it sought.

Unfortunately for the United States, however, once Russia is voted in, each member-state must “recognize” Russia as a member. No WTO members, not even Georgia, have indicated that they intend to deny Russia recognition. But there is one country that cannot legally recognize Russian membership: the United States.

The United States still has a Soviet-era provision in federal law called the Jackson-Vanik Amendment, which bars trade relations with certain countries guilty of human rights violations (namely, the Soviet Union). The measure continued to apply to Russia after the Soviet collapse, though every U.S. president has waived its provisions by decree since 1992. Only Congress can overturn it, however, and until it does so, the United States cannot recognize Russia as a WTO member.

The White House has called for the provision’s immediate repeal, but with Congress and the White House divided over so many issues, it seems unlikely the issue will be resolved swiftly — if at all — under the current Congress and presidency. This gives Russia another opportunity to increase US-Russian tensions. Indeed, Moscow could noisily decry the insult of the United States making Russian WTO accession possible only to derail it.

Balancing Crisis and Strategy

Just how many crises in U.S.-Russian relations does Moscow want, and what is its goal? Moscow’s strategy involves using these crises with the United States to create uncertainty in Central Europe and to make the Europeans uncomfortable over perceptions that the United States has forced Russia to act the way it is acting. Thus, it is not a break between Russia and the United States that Moscow seeks but a break between Europe and the United States.

Indications are emerging that the Central Europeans are in fact growing nervous, particularly following Medvedev’s new defense strategy announcement. With the United States not responding to the renewed Russian aggression, many Europeans may be forgiven for wondering if the United States is planning to trade its relationship with Central Europe in the short term to ensure the supply lines via Russia into Afghanistan remain open. It is not that the Central Europeans want a warmer relationship with Russia, only that they may feel a need to hedge their relationship with the United States. This was seen this past week with Poland announcing it would be open to discussions with Russia over missile defense (albeit within the paradigm of separate BMD systems), and with the Czech Republic, a previous American missile defense partner, signing multibillion-dollar economic deals with Russia.

But with more opportunities arising for Russia to escalate tensions with the United States, Moscow must avoid triggering a massive crisis and rupture in relations. Should Russia go too far in its bid to create an uncomfortable situation for the Europeans, it could cause a strong European backlash against Russia and a unilateral unification with the United States on regional security issues. And it is in Russia’s interest to refrain from actually disrupting the Northern Distribution Network; Moscow is seeking to avoid both complications in the Afghan theater that could hurt Russian interests (one of which is keeping the United States tied down in Afghanistan) and a strong US response in a number of other areas. Moscow must execute its strategy with precision to keep the United States caught between many commitments and Europe off balance — a complex balancing act for the Kremlin.

By Lauren Goodrich

Lauren Goodrich is the Senior Eurasia Analst for the private intelligence corporation Stratfor.

Russia’s Plan to Disrupt U.S.-European Relations is republished with permission of STRATFOR.

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The post Russia’s Roulette: Will Moscow Risk Its Relationships With The US & Europe? appeared first on Economy Watch.

A New Russian Empire: What Exactly Is Putin Planning?

Lauren Goodrich — Tue, 08 Nov 2011 04:46:51 +0000

Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.

If Russia has its way, a Eurasian Union (EuU) will be formed by 2015 – comprising of Russia and many of its former territories under the old Soviet Union regime. The EuU, while not a recreation of the Soviet Union, is a representation of a new Russian empire that will serve the nation’s strategic and economic needs; even at the expense of a new confrontation with the US.

US-Russian relations seem to have been relatively quiet recently, as there are numerous contradictory views in Washington about the true nature of Russia’s current foreign policy. Doubts remain about the sincerity of the US State Department’s so-called “reset” of relations with Russia — the term used in 2009 when US Secretary of State Hillary Clinton handed a reset button to her Russian counterpart as a symbol of a freeze on escalating tensions between Moscow and Washington. The concern is whether the “reset” is truly a shift in relations between the two former adversaries or simply a respite before relations deteriorate again.

The reset actually had little to do with the United States wanting Russia as a friend and ally. Rather, Washington wanted to create room to handle other situations — mainly Afghanistan and Iran — and ask Russia for help. (Russia is aiding in moving supplies into Afghanistan and withholding critical support from Iran.) Meanwhile, Russia also wanted more room to set up a system that would help it create a new version of its old empire.

Russia’s ultimate plan is to re-establish control over much of its former territories. This inevitably will lead Moscow and Washington back into a confrontation, negating any so-called reset, as Russian power throughout Eurasia is a direct threat to the US ability to maintain its global influence. This is how Russia has acted throughout history in order to survive. The Soviet Union did not act differently from most of the Russian empires before it, and Russia today is following the same behavioral pattern.

Geography and Empire-Building

Russia’s defining geographic characteristic is its indefensibility, which means its main strategy is to secure itself. Unlike most powerful countries, Russia’s core region, Muscovy, has no barriers to protect it and thus has been invaded several times. Because of this, throughout history Russia has expanded its geographic barriers in order to establish a redoubt and create strategic depth between the Russian core and the myriad enemies surrounding it. This means expanding to the natural barriers of the Carpathian Mountains (across Ukraine and Moldova), the Caucasus Mountains (particularly to the Lesser Caucasus, past Georgia and into Armenia) and the Tian Shan on the far side of Central Asia. The one geographic hole is the North European Plain, where Russia historically has claimed as much territory as possible (such as the Baltics, Belarus, Poland and even parts of Germany). In short, for Russia to be secure it must create some kind of empire.

There are two problems with creating an empire: the people and the economy. Because they absorb so many lands, Russian empires have faced difficulties providing for vast numbers of people and suppressing those who did not conform (especially those who were not ethnic Russians). This leads to an inherently weak economy that can never overcome the infrastructural challenges of providing for the population of a vast empire. However, this has never stopped Russia from being a major force for long periods of time, despite its economic drawbacks, because Russia often emphasizes its strong military and security apparatus more than (and sometimes at the expense of) economic development.

Related: Russia Economy

Maintaining a Strong State

Russian power must be measured in terms of the strength of the state and its ability to rule the people. This is not the same as the Russian government’s popularity (though former president and current Prime Minister Vladimir Putin’s popularity is undeniable); it is the ability of the Russian leadership, whether czar, Communist Party or prime minister, to maintain a tight grip on society and security. This allows Moscow to divert resources from popular consumption to state security and to suppress resistance. If the government has firm control over the people, popular discontent over politics, social policies or the economy do not pose a threat to the state — certainly not in the short term.

It is when the Russian leadership loses control over the security apparatus that Russian regimes collapse. For example, when the czar lost control of the army during World War I, he lost power and the Russian empire fell apart. Under Josef Stalin, there was massive economic dysfunction and widespread discontent, but Stalin maintained firm control over both the security apparatuses and the army, which he used to deal with any hint of dissent. Economic weakness and a brutal regime eventually were accepted as the inevitable price of security and of being a strategic power.

Moscow is using the same logic and strategies today. When Putin came to power in 1999, the Russian state was broken and vulnerable to other global powers. In order to regain Russia’s stability — and eventually its place on the global stage — Putin first had to consolidate the Kremlin’s power within the country, which meant consolidating the country economically, politically and socially. This occurred after Putin reorganized and strengthened the security apparatuses, giving him greater ability to dominate the people under one political party, purge foreign influence from the economy and build a cult of personality among the people.

Putin then set his sights on a Russian empire of sorts in order to secure the country’s future. This was not a matter of ego for Putin but a national security concern derived from centuries of historic precedent.

Putin had just seen the United States encroach on the territory Russia deemed imperative to its survival: Washington helped usher most Central European states and the former Soviet Baltic states into NATO and the European Union; supported pro-Western “color revolutions” in Ukraine, Georgia and Kyrgyzstan; set up military bases in Central Asia; and announced plans to place ballistic missile defense installations in Central Europe. To Russia, it seemed the United States was devouring its periphery to ensure that Moscow would forever remain vulnerable.

Over the past six years, Russia has pushed back to some degree against Western influence in most of its former Soviet states. One reason for this success is that the United States has been preoccupied with other issues, mostly in the Middle East and South Asia. Moreover, Washington has held the misconception that Russia will not formally attempt to re-create a kind of empire. But, as has been seen throughout history, it must.

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Putin’s Plans

Putin announced in September that he would seek to return to the Russian presidency in 2012, and he has started laying out his goals for his new reign. He said Russia would formalize its relationship with former Soviet states by creating a Eurasia Union (EuU); other former Soviet states proposed the concept nearly a decade ago, but Russia is now in a position in which it can begin implementing it. Russia will begin this new iteration of a Russian empire by creating a union with former Soviet states based on Moscow’s current associations, such as the Customs Union, the Union State and the Collective Security Treaty Organization. This will allow the EuU to strategically encompass both the economic and security spheres.

The forthcoming EuU is not a re-creation of the Soviet Union. Putin understands the inherent vulnerabilities Russia would face in bearing the economic and strategic burden of taking care of so many people across nearly 9 million square miles. This was one of the Soviet Union’s greatest weaknesses: trying to control so much directly. Instead, Putin is creating a union in which Moscow would influence foreign policy and security but would not be responsible for most of the inner workings of each country. Russia simply does not have the means to support such an intensive strategy. Moscow does not feel the need to sort through Kyrgyz political theater or support Ukraine’s economy to control those countries.

The Kremlin intends to have the EuU fully formed by 2015, when Russia believes the United States will return its focus to Eurasia. Washington is wrapping up its commitments to Iraq this year and intends to end combat operations and greatly reduce forces in Afghanistan, so by 2015, the United States will have military and diplomatic attention to spare. This is also the same time period in which the US ballistic missile defense installations in Central Europe will break ground. To Russia, this amounts to a US and pro-US front in Central Europe forming on the former Soviet (and future EuU) borders. It is the creation of a new version of the Russian empire, combined with the US consolidation of influence on that empire’s periphery that most likely will spark new hostilities between Moscow and Washington.

This could set the stage for a new version of the Cold War, though it would not be as long-lived as the previous one. Putin’s other reason for re-establishing some kind of Russian empire is that he knows the next crisis to affect Russia most likely will keep the country from ever resurging again: Russia is dying. The country’s demographics are among some of the world’s worst, having declined steadily since World War I. Its birth rates are well below death rates, and it already has more citizens in their 50s than in their teens. Russia could be a major power without a solid economy, but no country can be a global power without people. This is why Putin is attempting to strengthen and secure Russia now, before demographics weaken it. However, even taking its demographics into account, Russia will be able to sustain its current growth in power for at least another generation. This means that the next few years likely are Russia’s last great moment — one that will be marked by the country’s return as a regional empire and a new confrontation with its previous adversary, the United States.

By Lauren Goodrich

Lauren Goodrich is the Senior Eurasia Analst for the private intelligence corporation Stratfor.

Russia: Rebuilding an Empire While It Can is republished with permission of STRATFOR.

Get more special features from the world’s top economists in your inbox. Subscribe to our newsletter for alerts and daily updates.

The post A New Russian Empire: What Exactly Is Putin Planning? appeared first on Economy Watch.