The Watershed Year: Interim Results

18 december 2014

A Chance for a Fundamental Renewal

Sergei Karaganov, Doctor of History, is Dean of the School of World Economics and International Relations at the National Research University–Higher School of Economics. He is also Honorary Chairman of the Presidium of the Council on Foreign and Defense Policy.

Resume: Today Russia is confronted by the West which is largely demoralized by its own blunders and no longer a source of moral supremacy and appeal for most people in the world. Sided with Moscow is the rising “non-West” that comprises the majority of countries and most dynamic economies.

The year 2014 is likely to go down in the history of Russia as a time when its foreign policy course was tightened and its internal and economic policy guidelines started to change. The former was almost inevitable. It is a risky move but it may potentially be beneficial for both the country and the world. The change in the tone and essence of relations with the West, its reaction and sanctions may prod Russian elites into focusing on internal renewal. If this does not happen, the high-quality and consistent diplomacy will not be able to keep Russia from losing its position as the world’s third largest power and from drifting away into political periphery. Or worse, this may lead to a major failure.

The study of the causes of the current standoff indicates that it will be profound and long. It will not be an exact copy of the previous Cold War, though, as there is more geopolitics to it, meticulously hidden hitherto, than there is ideology, and more information and economic implications than direct military confrontation. And yet, direct clashes cannot be ruled out.

RUSSIAN MOTIVES

The essence of Russia’s policy has been stated by Vladimir Putin on several occasions, specifically at the Crimea accession ceremony in March and at the Valdai Forum in October. Below I will offer my understanding of the driving forces behind the West’s policy and Moscow’s tough and resolute actions, and give a forecast of how the situation may develop in the future.

Russia’s confrontation with the West was largely predetermined and came as a reaction to its policy. Besides, it was sought after one way or another by all sides, explicitly or half-consciously.

Its major cause is the West’s refusal to recognize a worthy place for Russia in European and global politics, which Moscow considers natural and legitimate. The West has been trying to act as a victor, while denying this position to Russia. It pursued a Versailles policy de facto, albeit in “velvet gloves,” that is, avoiding direct annexations and contributions, but continuously limiting Russia’s freedom, spheres of influence and markets, while at the same time expanding the sphere of its own political and military interests through NATO expansion, and its political and economic pursuits through EU enlargement. One lie followed another, including the promise that the states in this new European zone would come round and assume a more constructive stance with regard to Russia. But the opposite happened: the elites in the new EU countries, especially Poland and the Baltic states, became even more hostile and whipped up anti-Russian sentiment in the North Atlantic Alliance and the European Union.

The Cold War was declared over, but its worst instruments, such as Dulles’ idea of “pushing back” communism, are being employed towards non-communist modern Russia, although many of those who have been implementing this policy flatly deny it even to themselves.

By 2007, concrete plans were ready for Ukraine’s admission to NATO. This would have created an absolutely unacceptable security situation for Russia which has a 2,000-kilometer-long unprotected border with the alliance. Although NATO remained relatively inefficient from the military point of view, it proved in the first fifteen years after the official end of the Cold War that if it were not contained, it would quickly develop from a defensive into an offensive bloc. Two attacks on Yugoslavia, with the one in 1999 particularly outrageous; the attack on Iraq by a U.S.-led coalition; and the war against Libya – all these events convinced most members of Russian elites, even Western-minded ones, that NATO’s expansion had to be stopped. And so had to be the very logic of the West’s policy after the Cold War – dictating its own rules of the game or rather imposing a game without rules.

In Munich, Putin made an effort to bring to the West Russia’s disagreement with this logic. But the West preferred not to hear him again. Moreover, an attempt was made to admit Ukraine to NATO on the sly. It failed though, thanks to some European nations, among others, which were blindly being drawn into this ploy. The abovementioned logic was dealt a blow when Russia crushed the Georgian troops that had invaded South Ossetia and killed Russian peacekeepers there.

However, the expansion game resumed several years later. This time it was not offensive, it was played as a rearguard operation by Europeans and as a counteroffensive by Americans in a bid to prove that the West was not losing its ground. This was largely the underlying motive of attempts to draw Ukraine into an economically unfeasible association with the EU which would once again rekindle prospects for NATO’s expansion. In fact, the latter was the main cause of the Ukraine crisis.       

I believe that many members of Russian elites also needed this crisis, consciously or not, to justify the idleness of the last six or seven years when, having ample resources and a favorable market situation, the country had basically given up reforms and, while lazily swearing and vaporizing on modernization, was sliding into stagnation that threatened to throw the country back. Some needed it to consolidate their positions in the government; others, although this is discussed least of all, to “nationalize” themselves and those around them, that is, to return to their home turf and stop fooling around, taking their money, stolen or earned, out of the country and wasting it away abroad, but rather focus on national development; or to get rid of those who did not want to “get nationalized” or could not do so.

I think one of the reasons for Russia’s deliberate aggravation of the lukewarm confrontation was its understanding that with a clear downward trend set to continue in the national economy in the next three to four years and with a vulnerable Western flank, it could not hope for strong positions in Asia. Attempts to turn this flank into a base and a strong support had failed. Europe did not want to or could not create a continental alliance proposed by Russia as a new European security system or as a Union of Europe – a common human, energy and economic space from Lisbon to Vladivostok.

Europe would not listen to Russia’s proposals and tried to resume expansion, while rejecting any integration with the Customs Union and subsequently with the Eurasian Economic Union, which initially was conceived as an alliance built on common, mainly European, laws and standards.

The assessment of the main global trends is also prodding Russia into firmly defending its interests. A long global economic slowdown has spurred the rise of radicalism and attempts to solve domestic problems through external escapades. The modern world’s largest power, while actually backing off, has embarked on a course of destabilization in some regions and is simply pursuing an incompetent and irrational policy. The security vacuum in East and Southeast Asia is growing. The Middle East has entered a period of turbulent destabilization. The circuity of words about a new liberal world order can no longer conceal the intention to re-nationalize international relations and go back to modernist geopolitics of the past centuries. Meanwhile, the institutions and rules of global governance are weakening or failing to meet the new world’s needs.

Even economic globalization is experiencing major setbacks. The tendency towards semi-closed economic blocs is gaining momentum. Having realized that globalization had begun to benefit its competitors, the West that had conceived it started to drift away from it. This became particularly evident with the policy of sanctions against Russia, for they are likely to do as much irreparable damage to the WTO as Italy’s attack on Abyssinia did to the League of Nations.

The rejection of force, the search for compromise and respect for interests were professed to a certain extent only within the European Union. However, beyond their borders both the EU and NATO acted in their usual away, trying to expand the area of influence and control either using “soft power” by spreading its own rules and setting examples, or using “semi-hard power” by exerting economic pressure or employing the army as in Yugoslavia and Libya.

AMERICAN ROOTS

A whole range of factors behind the current confrontation lead to America. Having achieved by the 2000s what it thought to be the strongest international positions in its history, the United States, intoxicated by its own success, took a dramatic plunge after two inept military operations in Iraq and Afghanistan. The U.S. lost them because of the glaring weaknesses of the political system and the dwindling appeal of its economic model following the 2008-2009 crisis; but most importantly, because an alternative model of authoritarian or semi-democratic capitalism proved to be more enticing to many nations. This model is personified by the BRICS, but mainly by China. However, these states and the organization itself were diligently ignored, even though they were progressing and enlarging. Representing the biggest part of the world and its future, at this point at least, they began to pursue independent or even anti-Western policies, following Russia as their flagship. Having risen out of ashes and having lost hope of becoming part of the West, Russia is now militarily invulnerable, equipped with skillful diplomacy and headed by the strongest leader in the present-day world, even though fifteen years ago it was humiliatingly begging for help and making concessions after some balking.

Barack Obama came to power with a mandate for national revival. And some economic progress has been made. But until recently he could not consolidate the deeply divided elites, most members of which were demanding that America revert to the imperial missionary policy and regain its dominant international positions lost in the last decade. Gradually, the president started drifting towards traditionalists. The simmering anti-Sovietism and anti-Russianism were a factor that united the U.S. establishment. Moscow, which had lost all trust in the United States over the past years, was not eager to mend the relations. Irritation and mistrust were snowballing. The reset designed by the U.S. to appease and neutralize Russia when America was weak had failed to solve key problems and was doomed.

Both sides needed an enemy, but Russia probably more so. When part of the American elites, using the hopeless situation in Ukraine and acting together with their European minions, engineered a crisis in that country, and Moscow responded in a very harsh way, Obama’s enlightened and postmodern administration invoked Reagan-era plans to ruin the Soviet Union. At that time there was Poland with Solidarity and an almost inevitable deployment of Soviet troops, which was avoided owing to Wojciech Jaruzelski. Now it is Ukraine. Back then efforts were made to upset the construction of gas and oil pipelines; now there are the South Stream intrigues and attempts to reduce mutual gas interdependence between Russia and Europe and push down oil prices. In 1983, there was hysteria over the South Korean Boeing (presumably sent purposefully and brought down by mistake); in 2014 there is frenzy over the mysteriously downed Malaysian Boeing. Reagan called the Soviet Union an “evil empire” and imposed sanctions against it; now America is going out of its way to demonize Putin, without concealing its goal of either changing the top leadership in Russia or inciting popular dissent. The U.S. is also willing to boss its European allies around. 

It seems this policy will outlive Obama as its goal is not so much to punish Russia as by defeating Russia to try and stop the growing influence and boldness of the “non-West,” primarily China.

EUROPEAN REASONS

The European motives in this new confrontation are similar to, but at the same time different from, the American ones, and to many appear to be internally even harder. In fact, while for the U.S. the conflict over Ukraine is part, albeit important, of the geopolitical game to restore its positions and prevent the rise of its competitors, for Europe the future of the integration project itself is at stake. Like the U.S., Europe has been growing increasingly nervous about the rise of the non-West and irritated by the confidence and even arrogance regained by Russia which only recently seemed to be content with the role of a junior. It is also worried by Moscow’s readiness to defend the old European values such as Christianity, the family, the state, nationalism, and sovereignty, which are still supported by most Europeans, while their elites are rejecting them or trying to leave them behind. The overwhelming majority of other nations share these traditional values as well.

But the main reason is that the European project is bursting at the seams. Most European countries, except Germany and some northern nations, no longer want to work hard enough to be able to successfully compete in the new world. Europe is experiencing a long demographic decline, brain drain and an innovation gap. It took tremendous effort to bring the euro crisis under control, but its root causes are still there. Some countries hastily admitted to the EU are stagnating. The European project is losing its appeal. The number of Eurosceptics is growing both on the right and on the left. Separatism is rising. Short-term interests are prevailing over strategic ones in the policies of almost all governments. The achieved level of openness and electoral democracy makes it extremely difficult to ignore or control these processes. But no country can or wants to give it up.

Faced with these challenges, the successful German elites have begun to adapt the European project to their own needs, giving it a more pronounced German slant. However, the underlying principle of the project is peaceful development since Europe and Germany cannot and do not want to protect their interests by force.

Drawing Kiev over to their side was not a priority for the majority of Europeans and they never thought about the risks involved, hoping that the virtual engagement of Ukraine through association would pep them up and pour new wine into old wineskins. There were of course those, especially in Poland and Sweden, who wanted to spite Russia, press it harder and even take revenge for the past defeats or please the senior American partners.

When Russia began to flex muscles openly, some European capitals got scared and even panicked. They had hoped to continue the ritual ten-against-one fencing game, but the opponent suddenly threw the foil away and snatched a shaft, which they had long forgotten how to use.

They wanted to forget the events of fifteen years ago when, terrified by the Yugoslav crisis, they appealed to the Americans who insisted on the bombing and separation of Kosovo. Those events have now boomeranged on them not somewhere on the fringes of Europe but almost in its heart. So if the Ukraine conflict is part of some global game for the Americans and they seem to be prepared to fan it further until they get an asymmetric response and/or bring it to a more acute stage, the European and German elites are seeking to preserve the Europe they are accustomed to. In other words, it is a matter of their survival. This explains why the Europeans more than the Americans are interested in settling the conflict and going back to peaceful European life.

The driving forces of the crisis also include the shared interest on both sides of the Atlantic to unite in the face of new competitors. The Europeans want to lean upon a stronger partner; the Americans would like to bring their allies closer and, most importantly, prevent their integration with Russia, which would only make all Europeans stronger.

RUSSIAN POLICY PROSPECTS

That confrontation was unavoidable became obvious in 2012 and especially in 2013 when practically any Russian move met with increasingly hostile and almost utterly negative rhetoric. This left Russia virtually no incentive for constructive behavior. The last remaining doubts had dissipated before the Sochi Olympics which the West nearly unanimously wished to see failing and which most Western leaders never attended. By that time analysts, including myself, had formed the impression that a strong confrontation was only months, if not weeks, away. 

Russia’s foreign policy successes, including the Syrian chemical weapons plan, which objectively benefitted everyone, caused further irritation. Most members of the Russian elites began to understand that if Moscow wanted to pursue an independent policy, which is only natural for a country that claims to be a great power, their partners had to be taught to get used to that.

Ukraine became the main testing ground for developing a new modus operandi because its territory was of critical importance for Russia’s security, because the Ukrainian elites had failed to build a legally capable state, and because the West was trying to draw it into the zone of its interests and control. The economically hollow and politically destabilizing Association Agreement with the EU was the last straw. The refusal to sign it sparked mass protests against the hateful and totally corrupt government, provoked barefaced Western interference, brought ultranationalist, if not fascist, forces to the political scene, deepened all existing rifts, and eventually led to a coup, de facto supported by the West. 

After that Moscow helped the people of Crimea to make their dream come true and reunite with Russia. It began to support rebels in southeastern Ukraine who sought to fence themselves off from the new authorities in Kiev.

Russia is entering a new stage of confrontation with a smaller territory and fewer assets, especially technological and intellectual ones, than in Soviet times. But it has preserved its nuclear weapons and natural resources, which it could have lost in the turmoil of the 1990s. Russia has got rid of numerous liabilities and no longer has to subsidize socialist countries and most of the former Soviet republics or to keep the monstrous military behemoth that was devouring the country before.

With the new identity, shaky as it is, Russia is drawing much more strength from state nationalism than Soviet Russia did from the communist idea that had been withering since the 1970s. The Russian economy is still rather weak, but the market and private ownership have forever swept away the factor that played a key role in the collapse of the Soviet Union – inability of the planned economy to feed the people.

The international situation has also improved immensely. The Soviet Union had to confront both the rising West, which was prevailing economically, morally, militarily and politically, and China. Socialist allies were unreliable and socialist-oriented countries in the Third World were too weak and too costly.     

Today Russia is confronted by the West that is still quite strong and trying to counterattack and yet weakened and largely demoralized by its own blunders, and no longer a source of moral supremacy and appeal for most people in the world. Sided with Moscow is the rising “non-West” that comprises the majority of countries and most dynamic economies. It won’t be hard to find financial resources and alternative technologies for Russia, even though less effective, elsewhere. The world has changed dramatically, giving more economic and political freedom to all countries. The vote in the United Nations where the majority of countries supported the resolution condemning Russia’s incorporation of Crimea was portrayed by Western information warmongers as Moscow’s defeat. However, countries representing the biggest part of the world voted against it or abstained, despite legal doubts over the incorporation. In terms of propaganda, this may as well be presented as Russia’s resounding victory.

Russian-Chinese relations have reached an unprecedented level of trust in 2014. The two countries have signed a gas contract fixing prices well above those they haggled over for years. They will soon sign an agreement on a new gas pipeline to China. This will give Russia the long-awaited chance to diversify its gas exports and reduce its dependence on the less reliable European market.

There are no immediate plans to change the principal customer, but this will allow Russia to diversify supplies and move away from the onerous one-sided economic orientation. Russia is not seeking to give up interdependent trade with Europe, which the U.S. is trying to undermine, but to supplement it with an effective and mutually advantageous interdependence in Asia. In the future though, Moscow will be faced with the problem of excessive dependence on Beijing. But for the time being they are not sufficiently interdependent. China needs Russia, its capabilities and resources just as much as Russia needs China.

The Shanghai Cooperation Organization and the BRICS are getting more and more active and their successes can no longer be hushed up. The agreement signed by three countries in May 2014 to create a Eurasian Economic Union, which may be joined in the future by Armenia and possibly by two or three other ex-Soviet republics and probably even several non-Soviet countries, lays the groundwork for a solid economic alliance in line with global trends at a time when the world is breaking into separate trade and economic blocs.

A new transportation configuration is also emerging based on the integration of the land section of China’s Silk Road with Russia’s Trans-Siberian Railway, Baikal-Amur Mainline and Northern Sea Route. The Shanghai Cooperation Organization, which is likely to admit India, Pakistan and ultimately Iran, seems to be the core of an evolving Eurasian structure with an increasingly manifest security component.

In 2013-2014, Russia began – at last – to turn towards East and Southeast Asian markets by accelerating the development of Siberia and the Far East even though it has been slowed down by the need to earmark resources for rebuilding the infrastructure and economy of Crimea, the gem of the Russian Empire and the Soviet Union, half-ruined during Ukrainian rule, as well as by the need to provide massive support to the people of southeastern Ukraine affected by the civil war there.

An important result of 2014 is that most people and members of the Russian elites are now prepared to fight for the interests of the country even to the detriment of their own wellbeing. The biggest part of the elites and nearly the vast majority of people have rallied around the president and his policy. Russian elites have dropped ideological blinders and illusions about their partners. Instead they have gained extensive experience of survival, which many, including myself, think was nothing short of a miracle. What also makes Russia’s position so firm is that its experience over the last quarter of a century has proven that any attempts to persuade the West lead nowhere but only whet its appetite. There is an understanding that at stake is the survival of not only the ruling regime but of the whole country amid attempts to weaken, if not ruin, it. And this raises the bets much higher than those of Western partners. A failure is possible in these circumstances but it is highly unlikely. As Leo Tolstoy wrote in his “War and Peace,” “A battle is won by those who is firmly resolved to win it!” It seems Russia is resolved to do so.

Russia’s policy in the Ukraine crisis has been quite successful so far despite high costs. Crimea’s incorporation has caused an upsurge of self-respect and patriotism. The reunification and sanctions that create a sense of real threat have consolidated the majority of people and elites around the Kremlin. But what is even more important is that Russia’s policy in the West has become active rather than reactive as it was before. Now it is Moscow that is imposing the rules of the game and creating preconditions for a new European order that would benefit not only the West but Russia as well.

The Russian leadership seems to be set for a long fight. Its purpose is, firstly, to set rigid red lines for the spread of Western influence to countries and territories which Moscow considers vital; secondly, to change the situation where the West unilaterally tried to establish the rules in international behavior; and thirdly, apparently to reach an agreement that would formalize the new European and world order.

Russian leaders have repeatedly stated that they are not seeking confrontation and, contrary to the national character, avoid impertinent statements their Western, and especially American, counterparts sometimes make. The sanctions have raised natural concerns among some members of the bourgeoisie and bureaucracy, but they cannot change Russia’s policy. There is a minority that supports sanctions in hope to spite the hateful regime, and there some in the ruling circles who have welcomed the sanctions as helping to consolidate and “nationalize” the Russian elites.

No one knows what impact the sanctions can have on the Russian economy in the medium and long term. The dramatic fall of the ruble in late 2014 is an alarming signal. On the positive side, it has enhanced the competitiveness of Russian enterprises for the next two to four years, but, most importantly, it has in fact slashed average incomes in dollars and euros which have been growing three or four times faster than labor productivity in the past several years.

There is practically no going back for Russia, it can only raise the bets. Especially as it has a good chance at hand: Ukraine is falling apart and demanding money which will inevitably go down the drain; and the economies of several European countries are already suffering from the effects of export cuts and, equally, of declining short- and long-term trust in business amid disheartening stagnation, as well as of the increasingly obvious uselessness of the sanctions.

Furthermore, Europeans are far off the level of consolidation of Russian society and elites that the Kremlin has achieved. And this leaves room for compromise with Europe in the medium term. And yet, one must not disregard the abovementioned profound and systemic reason for the European elites’ rejection of Russia’s tough stance. Americans are interested in further confrontation and will keep pushing for it. And the situation in Ukraine will continue to fan the flames. 

The West’s hopes for Russia’s economic instability will also fuel confrontation. Emphasizing Russia’s weakness, trying to exacerbate it and accentuating the absence of a viable and long-term development strategy seem to be the key elements of the Western strategy. If Russian elites, the leadership and the president appear unprepared to undertake drastic economic reforms, even by way of mobilization, this strategy may prove successful.

WHAT’S NEXT?

Such a deep crisis where the vital interests of its main participants are at stake is unlikely to end in the medium term as it will be fueled by the situation in Ukraine. The latter will apparently be turning into a failed state, and its political and territorial components will be in the hands of external players. Ukraine may become a source for the conflict’s aggravation either because of the “black swans” – unforeseen disasters – or because of attempts by internal or external forces to exacerbate the conflict. And there is no end anywhere in sight unless of course the Ukrainian people run out of patience or the country falls into several parts to be controlled by outside actors. The Europeans will look for ways to deescalate the crisis and reverse the sanctions that are backfiring on them. But the Americans will keep putting more pressure in a bid to “punish” Russia. And all this will continue until, God forbid, a new confrontation like the Caribbean crisis occurs when the Americans see that the costs are too high or fraught with escalation.

Nor do I see any possibility for Moscow to make serious concessions or for Russia to suffer a new historical failure. I do hope that the confrontation and sanctions will wake up the Russian leadership, elites and society from their languid reveling in wealth and affluence, long desired and obtained after a hundred years of deprivation, or in modest consumerism. History proves that Russian people never wake up until they get hit by hard times. The sanctions target the country’s weaknesses – underdeveloped industrial and innovation capabilities and dependence on energy export and imported technologies in some key sectors. But, simultaneously they point – like the finger of God – to the need to redouble efforts in order to overcome these weaknesses. The sanctions are very helpful in “nationalizing” the Russian elites. If Russia fails to listen to this “voice of God” and carry out drastic economic modernization, it will run out of luck it has had over the past fourteen years. 

Conditions for a decisive turn are building up, and the first signs of it can already be seen. The unprecedented fall of the ruble against the dollar and the euro, partly forced by circumstances but largely plotted, is a step in the right direction. Such turn in the national economic policy has been advocated by almost everyone except for a certain part of the incumbent economic elites linked to the previous policy that has proved ineffective.

* * *

One can only regret that the twenty-five years since the end of the previous Cold War were not used to build a new stable global and European security system and that by the beginning of the second decade of the 21st century the world happens to be in a far more unstable and more dangerous state than it was even at the end of the past confrontation.

But Russia has not given up the idea of creating a Union of Europe, a common humanitarian and economic space between the EU and the Eurasian Economic Union. It is also committed to bringing Russian-American relations back on track but on a new, more stable and more mutually respectful basis. Clearly, we should try to win together wherever possible; our partners’ attempts to do so unilaterally precipitated the current crisis.

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