Putin’s Russia: domestic disarray, foreign triumphs  
26 Feb 2016|

That Putinism is in trouble at home isn’t news. Russian economist and former vice chairman of Russia’s Central Bank, Sergei Aleksashenko, estimates that Russia’s GDP fell by 9% in 2015. In a recent poll by the only independent pollster in Russia, 80% of respondents said the economy was in crisis.

What’s not widely appreciated outside Russia is the severity of the crisis, and the degree to which economic sanctions have reinforced the sharp fall in revenue from energy exports. Members of the establishment elite are voicing alarm and calling for a change of course at home and abroad. In a recent trenchant article, economist Yakov Mirkin argued that as Russia’s global power will depend on the health of its economy, its ‘rash’ foreign policies must be moderated to reflect harsh economic reality.

Mirkin supports his case with an index of sombre indicators. In 2015 Russia’s industrial production fell by 4–5%; retail trade by 8%; and foreign trade, affected by sanctions, by 35–40%. Real wages fell by 10%. The ruble exchange rate halved. Infrastructure is aging but not being replaced: 80% of machine tools and 50% of all industrial machinery are more than 20 years old. As domestic production of metal-cutting tools meets only 10% of demand, 90% must be imported, but imports fell by 50% last year as a result of sanctions.

Mirkin argues that the economy is being re-militarised. Officially the Russian military consumes 4.5% of GDP, and Sergei Aleksashenko asserts that ‘Russia is compelled to spend more than 20% of its budget on maintaining and re-equipping its army.’ If expenditure on ‘security’—defined in broad terms in Russia—were included, the figure would be closer to 30%, possibly more.

In a piece for Russia’s most respected newspaper, Dmitry Trenin, one of Russia’s most influential commentators on national security and foreign policy, goes further than Mirkin:

‘With its existing economic and political system Russian can ultimately only lose in global competition…Russia must re-format its ruling elite, which mainly serves not the national interest but its own narrowly corporate and personal interests…If the political will for such re-formatting is lacking an acute domestic crisis could cause the collapse not only of the system, but of the country itself.’

This is subversive stuff, and suggests that serious doubts about some of Putin’s policies are spreading in the elite. Putin’s popular standing remains high, but Russian history—and the outburst of protest against him in 2011–12—shows that unrest in the elite is cause for disquiet.

But if the picture at home is darkening, things abroad are going swimmingly. Putin’s Syrian gambit, the refugee stampede engulfing Europe (which Russia’s bombing campaign is fueling) and the terrorist attacks in Paris have transformed the geopolitical landscape.

At the recent Security Conference in Munich Russian officials noted jubilantly that within the EU support for economic sanctions is unravelling. Germany’s vice-chancellor Gabriel and France’s president Hollande are leading the charge, which includes the EU’s foreign policy chief Mogherini and the European Commission president Juncker. Russian Prime Minister Medvedev even thanked Hollande publicly for his ‘balanced and constructive views’. A member of the Russian delegation claimed that ‘in the West the crisis in Ukraine is no longer seen as evidence that Russia is unreliable.’

No less encouraging for Putin and his cohort, the Russian peace offensive mounted in the West to coincide with their military campaign in Syria is proving just as effective as Russia’s bombing of the Syrian rebels. Indeed, the more ‘assertive’ Moscow’s behavior has been, the more insistent calls in Western capitals for ‘dialogue’, ‘cooperation’ and ‘engagement’ have become.

A recent Lowy Institute report (PDF) argued that Australia should ‘consider a limited and certain re-engagement with Moscow… potentially nudging Russia towards a more balanced and constructive posture in regional affairs.’

Obviously one has to talk to Russia. But a desire to have a positive dialogue fosters the hope that, if so engaged, Russia will mellow and make concessions. That was presumably more or less the rationale for the ‘reset’, Obama’s policy of constructive engagement. It proved short-lived.

Putin’s strategic planners don’t share the assumption that good relations between countries are an end in themselves, and presumably have their own definition of ‘cooperation’. Assuming that Putin’s Russia would concur in being ‘nudged’, it would certainly have demands in return. So what other benefits would Russia see in fostering closer ties with Australia?

Australia is a formal ally of the country which the Russian state media—and senior Russian officials—identify, in xenophobic terms, as Russia’s enemy. And Australia has a formal relationship with NATO, which Putin has said he wants to see abolished. So for engagement with Russia to be genuinely constructive, Russia would have to agree to quarantine both Australia’s membership of ANZUS and its relationship with NATO.

Putin may well be in power till 2024—under the Russian constitution he has the legal right to serve two six-year terms i.e. from 2012 to 2024. That helps to explain why even Henry Kissinger, who enjoys Putin’s favour and has long argued for another détente, sees no prospects of an improvement in US–Russian relations. And, as the recent arms shipment to Fiji demonstrates, for Putin the Indo-Pacific region is another theatre in which to pursue competition with the US and its allies.

Russia’s concept of a ‘new system of indivisible security for the Asia Pacific’ presupposes the dissolution of existing military alliances, including ANZUS. If one believes that ANZUS is obsolete, because Australia faces no foreseeable threats, or that ANZUS itself is a threat because it makes Australia a potential target, then Russian policy in the region—including giving $41.8 million worth of Russian arms to Fiji—can be seen ipso facto as constructive.