“The poverty that came with Boris Yeltsin gen­er­ated both a cyn­i­cism and a lack of faith in the sys­tem. Putin made life bear­able and made it clear that Rus­sia was back”

Financial Mirror (Cyprus) - - FRONT PAGE -

Rus­sia is an enor­mously weak coun­try that Putin is work­ing des­per­ately to make ap­pear far more pow­er­ful than it is. He is do­ing ex­tremely well at creat­ing that il­lu­sion. There is a say­ing that per­cep­tion is re­al­ity. That say­ing is rub­bish. If it were true, re­al­ity would never have caught up with the per­cep­tions sur­round­ing the sub­prime cri­sis. Ger­many would have won the Bat­tle of Bri­tain, and – for that mat­ter – the Soviet Union would still ex­ist. Per­cep­tion can buy time and time can, some­times, change re­al­ity. But some­times all that per­cep­tion puts off is the in­evitable, and in my view that is the case with Rus­sia.

Rus­sia’s fun­da­men­tal prob­lem is eco­nomic. En­ergy sales

There is a be­lief that poverty in Rus­sia poses less of a threat to the regime than it does in other coun­tries. This is true, but with a strong caveat. If the Rus­sians be­lieve that their suf­fer­ing is in the name of a state that stands with and for them, they will en­dure. This is why Josef Stalin could call on Rus­sians to fight, starve and die. The Rus­sians be­lieved he was with and for them. It was why the Soviet Union col­lapsed and Yeltsin nearly plunged the coun­try over the edge. No one be­lieved that Leonid Brezh­nev, Yuri An­dropov, Kon­stantin Ch­er­nenko and least of all Mikhail Gor­bachev cared about them. And cer­tainly no one be­lieved Yeltsin did. But Putin made them be­lieve that he cared about them, and he made them feel that he would not only feed them, but that he would make all the suf­fer­ing worth­while. He con­vinced them that he was a win­ner.

The prob­lem was in an eco­nomic fail­ure so fun­da­men­tal that it is fre­quently ig­nored. When Putin took power, wealth was in the hands of a dozen or so oli­garchs, and the econ­omy and Rus­sian power de­pended on en­ergy, which was the source of rev­enue and lever­age over na­tions re­liant on Rus­sian sup­plies. In many ways, Rus­sia was like Saudi Ara­bia in the 1970s. Putin’s task was to build a modern econ­omy in Rus­sia us­ing the rev­enue from en­ergy as in­vest­ment cap­i­tal. It was a daunt­ing task and he failed at it. This strat­egy made Rus­sia de­pen­dent on some­thing it didn’t con­trol – en­ergy prices. And since en­ergy prices have his­tor­i­cally fluc­tu­ated, Putin’s pri­mary strat­egy was to hope that prices would stay high – but that hope ran out in 2014.

En­ergy prices fell be­cause there was world­wide eco­nomic stag­na­tion and over­sup­ply. A vague hope was that Rus­sia and Saudi Ara­bia could force the price up by cut­ting pro­duc­tion. But the Saudis were is­su­ing bonds to raise money and the Rus­sians had months to go be­fore re­serves were ex­hausted. Cut­ting pro­duc­tion meant cut­ting in­come, but once pro­duc­tion re­sumed to make up lost in­come, prices would quickly de­cline. The math didn’t work.

The sit­u­a­tion in the re­gions grew harsher, and Putin was forced to fo­cus on build­ing pa­tri­o­tism to show that the pri­va­tion was worth it, for it had made Rus­sia great again. But Putin could not sim­ply as­sert this, he had to show it. He had to demon­strate his power in the only way pos­si­ble, by con­fronting the United States.

This be­came even more im­por­tant af­ter the pro-Rus­sian gov­ern­ment in Ukraine was de­posed. Putin pointed to the seizure of some­thing his forces ef­fec­tively held – Crimea – and the ris­ing in eastern Ukraine as ev­i­dence of his power. He gave Rus­sians a sense of be­ing un­der siege but, given that the ris­ing only reached a stale­mate at best, he did not give them a sense of ul­ti­mate vic­tory. He there­fore du­elled with the United States rhetor­i­cally, us­ing the ap­par­ent clum­si­ness of Pres­i­dent Barack Obama to demon­strate his skill. But in the end, the Rus­sian econ­omy was in a tail­spin and Ukraine was lost. The ap­pear­ance of best­ing the United States was col­lid­ing with the re­al­ity of Rus­sian weak­ness.

The Rus­sian move into Syria was the re­sponse. The Rus­sians have no strate­gic in­ter­ests in Syria. There have been at­tempts to fig­ure out why Rus­sia in­ter­vened and what its end game is. Its in­ter­ven­tion is lim­ited and it is bogged down, just as the Americans are. Even if Aleppo falls, the war isn’t over. Yet they are there.

One the­ory is that Putin in­ter­vened in Syria be­cause he be­lieved Rus­sia’s con­trol over gas sup­plies to Europe was un­der threat. Per­haps, but any po­ten­tial pipe­line go­ing through Iraq and wartorn Syria was un­re­al­is­tic in the first

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