Russia on the Brink – But of What?

Russia on the Brink – But of What?

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    A guest article from Balakirev

With oil prices in a slump, the rouble tumbling and domestic stock exchanges closing for days at a time, it’s tempting to imagine that the swaggering Russia visible over the past year or so is about to be replaced by a staggering Russia.

Well, not quite and certainly not yet. But there are strong signs that it has finally sunk in with Moscow’s leadership that it is not immune from the swirling economic problems besetting the world. In the space of days – from President Dimitry Medvedev’s highly aggressive State of the Nation address on 5 November to yesterday’s conciliatory-sounding speech in Washington – the Kremlin’s tone on international relations appears to have changed pretty spectacularly.

To some extent the appearance of change is probably deceptive, and arises as much as anything from selective quoting by journalists. On November 5th, Medvedev announced intentions to deploy Iskander missiles near Poland if planned US missile defence facilities there and in the Czech Republic went ahead. He hasn’t recanted on that threat. Nothing has changed and nothing will unless negotiations with the incoming Obama administration produce a solution.

    And in the meantime, Russia’s parliament, the Duma, has rushed through constitutional changes which some commentators believe are designed to allow Medvedev’s mentor and senior partner, Vladimir Putin, to step back into executive office with a lengthened presidential term which would let him rule for 12 more years.

Let’s step back a bit, to that 5 November address by Medvedev. First, there was the missile threat. Then, an accusation that Washington had provoked the summer conflict between Russia and Georgia. And no mention of Barack Obama, who had just been elected to succeed a US president whom the Kremlin blames for many of the world’s ills. Amid global headlines the next day featuring world leaders’ congratulations to the US winner, and efforts by international politicos of all stripes to ingratiate themselves with the US president-elect, Medvedev’s words struck a peculiarly sour note.

But most of the speech was on domestic issues – and all of it (as Medvedev himself has since noted) was intended for domestic consumption. In fact, the speech had been postponed twice, evidently because of disagreements over content. That alone points to the problem: The committee-drafted text no doubt went through numerous changes but someone simply forgot to synchronize it with international developments. These things happen.

    So what is it that we are seeing in Russia? Well, first, we’re seeing the new duumvirate – the Medvedev-Putin team – settling in and establishing its division of labour. Most commentators – in Russia and internationally – assume the hard-man Putin is still in charge and the more congenial-seeming Medvedev is a place holder. Maybe, but it may not matter, as power appears to be held collectively anyway and is reliant on competing financial and business elites.

Secondly, the competing elites are clearly worried about the international economic situation, which has hit them hard. Oil at $50 a barrel – which was what the benchmark Urals crude was selling at for a time last week – would, if sustained, seriously damage state revenues as well as oil company finances and, given the impacts on capital expenditures, would set the scene for a continued reduction in oil production in the years ahead. Two years ago, oil at that price seemed like a windfall. Now it’s very very bad news indeed.

Thirdly, Russia’s hopes of turning the rouble into an international reserve currency and Moscow into a global financial center appear as fantasies – although China seems now to have agreed to purchase Russian oil in roubles, so Moscow clearly isn’t giving up yet.

And finally – on foreign policy, Moscow is sending out all sorts of positive-sounding signals that it is ready to talk, on all matters – from engagement with Nato, to the future of the so-called “frozen conflicts” (various disputed strips of European territory left over from Soviet times). Some of this arises from altered mood music emanating from other parties – the EU’s willingness to squint a bit when it comes to full Russian compliance with the Georgian peace agreement for instance. Still, Moscow is responding positively.

In other words, there genuinely does appear to have been a change. How you date it – from the day after that Nov 5th speech, or from the destruction of the oligarchs’ international portfolios, or from Medvedev’s inauguration in May – depends on one’s leanings, but perhaps that doesn’t really matter.

The author is a Russia & Eastern Europe specialist working in public relations and is a former international correspondent.

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