This situation has several interesting features to it. First of all, this is not merely a show-off of Russian power (even though there is an element of it in there); there is no doubt that Ukraine has been receiving subsidised gas all this time and there has for several years been a genuine eagerness on the part of Russia to receive prices closer to the correct market value and this has not only affected Ukraine but also Belarus, which has had a far cosier relationship to its neighbour these past years, to no avail. Secondly, it is likely to have an effect on Ukraine’s relationship to the European Union. If, yet again, Ukraine is indeed siphoning off gas that is meant for EU countries, irritation is likely to rise. It might increase support for the new Russian pipeline running across the Baltic Sea, circumventing the most troublesome transit countries, and thus in the long run make Ukraine less able to rely on the EU to exert pressure on its main energy supplier. Russia could easily live with such an outcome. Ukraine on the other hand might have to enjoy a somewhat colder day after tomorrow. There is after all no coincidence that these conflicts have a tendency to erupt during winter time.

What better could one do on New Year’s Eve than take a quick look on what might be expected in the year 2009? The present economic downturn is likely to have large consequences for Russia, despite earlier claims to the contrary made by the political leadership. Already, the central bank has spent more than a quarter of its currency reserve just to prop up the rouble, and still during December it has had to silently make it slip by one percentage point eight times. Talk about a larger devaluation to come is about and a Russia analyst at one of the major investment banks, with whom this author had a chat, confirmed this perspective as very likely. There could be a 30% devaluation soon, which would obviously hurt both the Russian public and the business community, which in some notable cases has taken large loans in foreign currencies. The capital flight is in fact on the scale of the 1998 rouble crisis, according to an analyst at an asset manager specialising in the region. 

Another major issue is of course the crash of the oil price. With Russian oil trading at $32 a barrel it isn’t enough to support the federal budget, which for 2009 is based on an oil price of $95 a barrel.  The result will be a deficit of $52 billion to $86.5 billion, or up to 6% of GDP. In the short run such a deficit can be sustained by milking the stabilisation fund set up by the government to take care of excess oil revenues in the past; this fund, though, only holds $132.6 billion, so if worst comes to worst, it would not last even two years. Even if initially spending won’t be cut, an inflation rate that, even without the currency continuously being devalued, has never entered the area of single digits is likely to be felt. The car industry’s crisis is also likely to affect Russia directly, considering that several foreign manufactures have set up facilities in the country. It seems we have a recipe for both increased unemployment and diminished spending power.

This is a troublesome situation for those in power. The popularity of the sitting political leadership is based upon living standards having improved considerably since the chaos and misery of the Yeltsin era. That official propaganda has moved on from Soviet-style “telling people what to think” to “telling people what they want to hear” isn’t the same as saying Russians are fools, conveniently in the hands of their masters. On the contrary, they can be very eager to express their opinion, when they find current developments to be unpleasing. It has been seen lately in Vladivostok with its inhabitants protesting against meddling in their much beloved second-hand car imports from Japan. In 2006, pensioners took to the streets of Moscow to object to a decision aimed at replacing privileges such as free medication and public transport with monetary cheques. Despite the government’s effort to curb these hot feelings through the use of news coverage of how well the new system worked throughout the country, the ground was indeed trembling under then Prime Minister Fradkov. In the end they had to walk away from the reform. There is therefore absolutely no reason to suspect the Russian public to react differently this time, when their economic well-being is under threat. The difference is in the sheer amount of people affected, because this time we are not talking about a community of pensioners and war veterans. This time we are looking at an enraged population and a government that has so far failed spectacularly at reforming an ailing business environment and burdensome economic system when it had the opportunity to do so.

Now, the most interesting question seems to be how this will affect the issue of when (rather than if) Prime Minister Putin aims to retake the presidency from his protégé. It is the prime minister who is in charge of economic policy, thus a likely failure in this area would fall upon Putin’s shoulders. This could seriously hurt his reputation and credibility as national leader. With President Medvedev resigning from his office, citing the need for a more experienced hand at the wheel in this time of crisis, such a development could easily be avoided. As prime minister, Putin would in that case automatically assume the responsibilities of acting president in the same way he did when Boris Yeltsin stepped down on New Year’s Eve 1999. Russia was then facing a different crisis, one of terrorism and national humiliation. Putin was then able to restore the confidence of the Russian public and self-esteem of the country, earning him a truly remarkable level of popularity. If history were to repeat itself, now would be a good time, some might think.

This does not necessarily mean that Russia will take the first chance there is and actually do it. For once, Russia prides itself of respecting international law and by formally recognising South Ossetia and Abkhazia it would lose one of its most popular oratorical weapons against the West, namely to accuse it of hypocrisy when it speaks of Georgia’s territorial integrity while at the same time letting Kosovo walk away from Serbia. Also, Russia is in general not very fond of secessionist republics, which has a lot to do with the rather complicated ethnic composition of its own part of the Caucasus. One possible solution for Russia, brought forward yesterday by Izvestiya, a Russian daily, would be to insist that the question of formal independence be resolved within the system of international law, while backing their pleas all throughout the process, which would likely last for several years. Now, as this blog sees it, this would bring with it several advantages for Russia. First, it would not have to secede the moral high ground when it comes to respecting international law. Second, it would secure Russia’s influence in the secessionist republics thanks to them fearing to lose their most vital sponsor. Third, it would further diminish Georgia’s chances of joining NATO, since there would still be no formal solution to the fact that it is not in control of its entire territory. The Duma, the lower house of Russia’s parliament, is due to consider a request to recognise South Ossetia in September. The result is not likely to be much of a surprise, but as always the devil will be in the details.

For Russia has been waiting to seize upon an opportunity like this, allowing to finally prove to the near abroad that the support of the West and the United States in particular is of no worth. When it matters, these are friends that will not show up to defend it. This of course only works so long as countries do not gain admittance to NATO, due to the organisation’s mutual defence clause, but Russia is probably also counting on the fact that the war with Georgia should make the present member states (bar the hot-heads of Poland and some other former members of Russia’s sphere of interest) even more nervous about letting these countries in. But we’ll see. 

What shall be even more interesting to observe is how Russia will handle its next conflict. Another country that went through a democratic revolution encouraged (or sponsored, whatever) by the West is Ukraine, which is not home only to its own navy, but also to the main port of Russia’s Black Sea fleet in Sevastopol in Crimea. Crimea was given to Ukraine in 1954 as a present by then Soviet leader Nikita Khruschev, then nothing but a transfer between two administrative bodies of the Soviet Union, while today a stunning reminder of future’s total lack of predictability (something the readers of this blog should perhaps bear in mind, since predicting the future is what it more often than not attempts to do). Now, this arrangement is not totally uncontroversial. Negotiations have been going on for some time with regards to the Russian presence, but yesterday President Yuschenko signed a controversial decree stating that Russian warships crossing the Ukrainian maritime border must request a permission to do so from the Ukrainian General Staff no later than two days in advance. The relevant customs authorities must also be notified. The Russians to no surprise are not too amused by this by-passing of the negotiation process. The Ministry for Foreign Affairs in Moscow has already labeled this “a serious anti-Russian step” and it is of some interest because it constitutes a direct, although smallish, provocative move only one day after the official ceasefire in Georgia. Now, there isn’t going to be any bombardment of the Ukrainian coastline over this, but it is worth to keep an eye on this affair anyway, though it might be considered a little unsexy compared to an all-out war. Even though they can only move in one direction and one or two squares at a time, every pawn counts.

That the conflict escalated to the point where it got totally out of hand in such a short time came as nothing but a shock to the Western powers. The nervousness among leading politicians has become more obvious with every foreign minister or president visiting either Moscow or Tbilisi in the midst of the conflict. Not very surprising considering that this was the first time in ages that Russian forces physically entered another country with hostile intentions. Russia’s political position was, however, never going to be very easy, so a prolonged conflict was not going to be in their interest. Refusing to acknowledge Saakashvili’s proposal to cease the hostilities yesterday seems like nothing but slightly prolonging the inevitable, creating more fear in Georgia (apparently successful considering the panicking in Tbilisi) and letting President Medvedev be the one deciding when to end the conflict.

What this conflict has surely accomplished is pushing Georgia even further towards the West. Today it was announced by President Saakashvili that Georgia is to leave the Commonwealth of Independent States, the rather loose organisation of former Soviet republics of which it, despite its controversies with Russia, has remained a member. Still the feelings towards the West, which failed to offer any military support during the conflict, though mobilised an impressive diplomatic task force, are not unambiguously warm. Georgia’s ambassador to NATO Revaz Beshidze today accused the alliance’s member states of having made the escalation possible by not extending an invitation to join the organisation during a NATO summit in April. Looking at it from a different perspective one could of course also argue that NATO members at the time fearing a candidate for membership with not one but two frozen conflicts on its soil have been proved nothing but right. Even though these past events have inevitably made Georgia even more eager to join not only NATO but also the European Union (the EU flag has been flying over government buildings for years and was clearly visible behind President Saakashvili during his televised address yesterday), the question remains: How eager are the members of these organisations to let the Georgians in? The U.S. is sure to continue offering its support and this blog would not be surprised to see President Bush pay a visit shortly, especially after his harsh remarks with regards to the conflict on Monday.* A fair assumption is that Georgia will be offered closer ties with these organisations but without the prospect of full membership anytime soon.

Not all of Georgia will benefit of course. Abkhazia and South Ossetia are most likely to be lost for the foreseeable future. The latter should be expected to receive economic support from Russia for rebuilding and there is even the possibility that Russia might acknowledge it as a sovereign state, a move made far more credible thanks to the Kosovo precedent. In that case, the same courtesy would be extended to Abkhazia very quickly. This would of course finally bring to an end some of the uncertainties concerning the status of these regions, but the solution would have come at a very heavy price. There might be celebrations on the streets of Tbilisi and people smirking in the Kremlin tonight. That does not change the fact that Tskhinvali lies in ruins, so if its inhabitants fail to see the greater picture, they should be forgiven.

*The full statement can be found at http://www.whitehouse.gov/news/releases/2008/08/20080811-1.html.

Having done absolutely nothing to help in reaching a solution when it comes to Georgia’s frozen conflicts, other than maintaining status quo, it has been handing out Russian passports to the people residing in both South Ossetia and Abkhazia for years. Apparently, the fact that a large number of people have rather recently become Russian citizens has very conveniently proven to be reason enough to invade its southern neighbour. Not that Georgia and its government does not have itself to blame just a little for what is taking place at the moment. Russia is likely to have been waiting for something of this kind to happen for years and, quite frankly, President Saakashvili should have seen it coming. And perhaps he did. Provoking Russia into invading his country has certainly showed that Russia’s self-esteem is not confined to drafting angry press releases and making use of its veto in the UN Security Council. The message to the West is extremely clear; ironically, presidents Medvedev and Saakashvili might as a matter of fact have a common interest in presenting this picture, although their motives for doing so are sure to differ.

With the Russian armed forces crushing their Georgian opponents the message its leaders are sending to the West reads: NATO has no place in the South Caucasus. Having, due to its then utter lack of military muscle, had to accept Estonia, Latvia and Lithuania gaining entrance to the alliance, they are determined not to let history repeat itself. With most NATO members, bar the United States under President Bush, rather reluctant to let negotiations with Georgia get anywhere near offering a membership, this latest escalation certainly is not helping Saakashvili’s sake. The objections over Georgia’s instability have been proven right. But is such a goal really enough to engage in a full-scale invasion?

Rather, Russia’s objective is to humiliate not only Georgia but also the United States. Having invested loads of money and tonnes of prestige, it is now unable to help its comrade-in-arms in Iraq. The Emperor is naked, having tied its own hands fighting wars in both Afghanistan and Iraq. So much for being America’s friend. Russia is proving it can do whatever it wants in its own backyard and that the West should bloody well keep out. Leaders in “the near abroad” should also take this latest development into careful consideration when making their own foreign policy choices. Ukraine obviously springs to mind, but also Belarus, if we would chose to take a longer perspective on things. It is, though, perfectly clear at the moment that the ongoing events are likely to put massive strains on the already uneasy relationship between Russia and the West and that they will help to define their intercourse for the foreseeable future. But Russia does not care. To them, the West has brought this upon themselves. Kosovo was just one of many issues that, from their perspective, have already defined all there is to define. By crossing the border not only into South Ossetia but into Georgian controlled territory, while bombing pieces of Georgian infrastructure into pieces, Russia has made it known to the world that the foot has come down, even more so by publicly refuting an opening for negotiations. They are staging a parade for the world to witness and this blog would not be surprised at all were it in the end to go through Tbilisi, the capital.

With Putin in the background (or perhaps even in the foreground), it is very likely that the only part where Medvedev in the beginning will be able to exercise much influence will be on foreign policy. The sad truth is we do not know what this will mean. Medvedev has been exceptionally quiet on the issue, perhaps not too perplexing given the fact that he has always held positions of more domestic substance, such as head of the presidential administration and then first deputy prime minister. This, however, never stopped the person always thought to be his main contender for the presidential blessing, Sergei Ivanov, too first deputy prime minister. That Sergei Ivanov has been fairly active within foreign policy might perhaps not be too surprising, since he used to be minister for defence and as such far more involved in bilateral and multilateral issues than Medvedev, at least in public (Ivanov even once met with the King of Spain, somewhat obscure since he was then merely a member of the cabinet). There are analysts suggesting that Medvedev’s silence on the matter might have been because of disagreement with the path chosen. Even though he for a long time has been a member of Putin’s inner circle of co-workers and friends, there could be something to it. Let’s explore why. 

The most obvious reason is that Medvedev never served in any branch of the security services, in contrast to Ivanov who spent his career within first the KGB and then the heir of most of its part, the FSB. Medvedev, being the son of academics and himself briefly a law professor, does not perhaps have the instinctive mistrust of the West that has so poisoned many of the people in the Kremlin. This in combination with the election of an American president more keen on multilateralism and international co-operation might result in a much-needed improvement of Russian-American relations. If you compare him to Ivanov, the latter is by far more likely to make references to Nazi-Germany while talking on American hegemony.

Medvedev is also a liberal when it comes to economics, so he will probably put more emphasis on things such as trade. As president of Gazprom he is also likely to understand that Russian gas is not only a tool for exercising pressure on one’s customers, but that there is also a business perspective on all this. This will be important especially in dealings with the European Union. 

 All this is not to suggest that Russia’s stand on the main geopolitical issues of our time is likely to change. But with a new president in the Kremlin there might at least be some room to maneouvre. 

There are a few things to be considered here. Firstly, Dmitri Medvedev lacks a background within the security services, unlike many of the people considered to be viable candidates.  This means that the support of Putin becomes extremely important, since this will be the only factor constituting his presidential authority, at least in the beginning. This also serves as a guarantee for Putin’s continuous influence. Secondly, the choice of Medvedev probably means this is not a temporary arrangement. Medvedev is a fairly powerful candidate, though he will obviously not be as mighty as Putin for the foreseeable future. The circuits that have formed around Putin during his presidency will continue to fight for influence and Medvedev will have to rule in the shadow of his predecessor. On the other hand, this sounds a little like the situation for a certain Vladimir Putin when he ascended to the throne.

With United Russia continuously polling at some 68 % of the vote, one might ask oneself what all the fuss is about. It is obvious that neither of the opposition parties will have the slightest chance of claiming any successes this coming Sunday, so why the harsh treatment from the government side? Could it be that people farther down the chain of command have started to take the initiative, either out of fear that anything less will prove to be unfavourable from a career perspective, or as a way of proving their worthiness to the people above? It could be so, but that of course does not take away the responsibility from the people that have set this trend and encouraged its implementation. These are the people with the highest authority.

It might also be the case that the Kremlin is simply determined to state an example to everyone watching, that there is not even worth trying voicing a differing opinion. It is very timely to do that at this moment, when the present leadership is popular and nobody really cares about the fate of the opposition. It gets a lot harder when it grows stronger, as has been witnessed in the Ukraine and Georgia. The grip on society is hard, but not so hard as was the grip of the old Communist Party in the Soviet Union. It does not have to be and it is probably not something they want. People do not vote for United Russia or reply that they would like to see Putin seek a third consecutive term out of fear, but because they wish so, even though the foundation of their popularity is the fact that nobody ells gets to say anything.

The thing is opinion polls also show that Russians like the right to choose their leader and whom to represent them in parliament. Putin and his entourage know this very well and they do not want to make too strong an impression that this liberty is being eroded, even though this is exactly what is happening. They want to keep people wishing to vote for them, which is a lot easier if they are the only ones being heard. But this is for now, what the situation will look like a few years from now is highly uncertain. People that stay in power for too long have a tendency to at some point lose most of their popularity, which makes a popular uprising more likely. Better then to set the standard now to scatter what little opposition there is and not take any chances.

One of the most telling stunts was organised this week, when President Putin participated in 5,000-people rally, organised by the Za Putina movement. During the meeting Putin went out of his way to convince people that his opponents want a weak and divided country that would let them “plunder” it yet again, in the same way as the oligarchs did in the 1990s. He also criticized foreign intervention in Russian elections, thus creating not only a domestic enemy but also a foreign (read: Western) one. This propaganda is part of a larger attempt to make the saying of history’s unpredictability come through once more. Even though Russia is no longer embracing the ideological foundation of the Soviet Union, it certainly has no intention of letting go of its Soviet past. The chaos of the Yeltsin era was something of a modern version of the time of troubles to Russia, which is now fast reclaiming its independent, self-sufficient and influential position on the world arena. Or so it is said. The United Russia party more and more resembles the former almighty Communist Party, the successor of which in return is being more and more marginalized. The great accomplishments during World War II are especially commemorated (in itself definitely nothing wrong, the soviet sacrifices were huge), but small details, such as the Molotov-Ribbentrop pact and the attack on Finland, are seldom mentioned.

But seeing this as merely an attempt to knit together today’s Russia with the Soviet Union is making things a little too easy. You could also look upon this as a new revolution with Putin as its leader. The oligarchs (or at least a few of them, the disloyal kind) are today’s kulaks and ruthless capitalists, sucking the resources out of the Russian soil, stealing what belongs to the Russian people. Or perhaps its leaders, the most important of which, without any competition, remains Vladimir Vladimirovich Putin. He is the party leader (though not a member) and the balancing factor in the struggle between different factions. Something of a modern Brezhnev, however in obviously better health. Not only is he the only thing apparently holding Russia together; he is also the only one able to defend it against the evils of the West. Putin has for quite some time been invoking the image of West – the aggressor, which is endlessly pursuing its attempt to encircle the Russian nation, stealing and redistributing its natural resources and installing a weak, helpless regime. However, he who rules this country will not let that happen. He will continue to stand up for Russia and protect her interests, in much the same way as Stalin, who coincidentally is experiencing something of a rebirth, protected the Soviet Union and defeated its enemies. Putin, unlike Stalin, however does not have the luxury of an invading enemy against which to unite. He has to make one up, against which there obviously will not be any Stalingrad-like monstrous tank battles. He is instead recreating the sentiments of the Cold War, targeting foreign diplomats and their governments as interventionists and, then quite naturally, anyone who meets with such people as a suspect, a spy and a traitor. Apparently, this kind of language goes well with the Russian electorate. A direct confrontation, something Putin will be cautious enough to avoid, fearing perhaps its outcome, is not in anyone’s interest. At the moment, pointing the finger is enough to win this election.