Paul Roderick Gregory
A quarter century after the fall of the USSR,
Kremlinologists sense a putsch in the air, despite Vladimir Putin’s overwhelming approval
ratings. The tea leaves say that the Kremlin elite, dubbed by some as Politburo 2.0, is currently deciding whether Putin should go
before he makes a bad situation worse. The founder of the respected daily Kommersant predicts that
a dramatic change is about to take place and advises Russians who have the
means to leave the country for a month or so and take their children with them.
Putin’s failures are becoming more evident on a daily basis. No one
denies that Russia is a kleptocratic state whose leaders have stolen much of the national wealth. But Russia has
also become a pariah that breaks rules of the international order, engages in
official lies, and owes huge damages in international courts. Putin’s
Kremlin promotes and supports a view of the world that causes world leaders to
scratch their heads in dismay.
Putin’s economic policies are a disaster. Despite promises of
diversification, Russia remains a petro state at the mercy of the price of oil.
Struck by a perfect storm of falling oil prices, international sanctions and
self-imposed embargoes, the Russian economy is in its sixth quarter of
recession with only miserly growthin sight. Living standards are falling despite Putin’s promises of
stability and prosperity. The investment collapse has served to mortgage
Russia’s economic future. Only Putin’s bureaucracy seems to be surviving
unscathed. The vaunted reserve funds are close to being depleted. Little is left for a rainy day, and Putin’s
handouts are ceasing even to his friends.
What have the Russian people gotten in return? They have gained Crimea,
which many Russians believe belongs to Mother Russia. Putin’s saber-rattling
has garnered attention and fear. His plans to return Russia to superpower
status please those shamed by the USSR’s collapse. Many Russians are an easy
mark for Putin’s propaganda that the West covets its resources and plans to attack, with the Ukraine conflict being the first step in its
evil plan. They believe transcripts of two alleged CIA agents plotting (in
thinly disguised Russian accents) to shoot down MH17 in one of the most
sinister and complicated plots in history. (Listen to tapehere.) Russian parents and spouses must secretly bury their loved ones
killed on the Ukrainian field of battle.
Unlike the Russian people, Russia’s Politburo 2.0 understands the true state of the economy, including that Russia’s economists, contrary to earlier claims, are no Houdinis. The Russian economy, which stopped growing well
before Crimea, will be mired in recession until oil prices recover, possibly
many years hence. Russia’s highly indebted companies cannot borrow, and China
will not and cannot come to their rescue. The Kremlin embargo of food imports
raised inflation above 15%, more than triple any indexation of wages and
pensions. In his annual direct line with the Russian people, Putin could only express hope for a recovery of
the world economy but that they should not worry, his economic team has
everything under control.
Nor can the Politburo 2.0 find much positive in Putin’s foreign policy.
It did annex Crimea without firing a shot, but Crimea costs billions of dollars
and is sinking into a swamp of corruption. Although Western support for Ukraine
has been less than effective, the West has not abandoned Ukraine and seems
willing to supply it with funds to keep it going. Putin’s war has at long last
created a united Ukraine that will hate Russia for generations to come.
The war in southeast Ukraine has solidified the positions of pro-Russian
rebels who want independence rather than the Kremlin’s disrupting Ukrainian politics from within. As
the Kremlin arms separatist forces, it is risking a heavily armed and
unpredictable force on its own border. In the so-called lull following the
Minsk 2 accords, the Ukrainian army has strengthened its forces, so there is no
assurance that the pro-Russian rebels could defeat them even were they to be
unleashed.
The Politburo 2.0 must therefore ask itself: What is Mr. Putin’s next
step, and can we afford to go along?
None of Putin’s options are good. If he pulls weapons,
troops and support from the pro-Russian rebels, Ukraine will retake the
Donbass, and Putin and his Politburo 2.0 will be labeled losers. If he approves
a new offensive against Mariupol or to gain a land bridge to Crimea, the West
will impose sanctions that will demolish the moribund economy and put the
assets of the members of Politburo 2.0 at risk. Sanctions may include the
“nuclear option” of expelling Russia from the SWIFT banking transfer system and
bring Russian financial transactions to a standstill. Those who benefited
from Putin’s kleptocracy would face ruin.
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