The Russians Are Coming?

The day after the American presidential election, Russian President Dmitri Medvedev issued a harsh warning to the West. He announced plans to station short-range missiles in the Russian exclave of Kaliningrad, on the Baltic Sea, as part of a military strategy to neutralize the missile defense shield the United States is aiming to build in Eastern Europe. The Americans and their allies in Poland and the Czech Republic, where some elements of the system are to be built, insist that it is designed to protect against a threat from a potentially nuclear-armed Iran, and argue that even at its most ambitious, it would be essentially useless against a Russian attack. The Russians strongly reject that rationale. “We have told our partners more than once that we want positive cooperation, we want to act together to combat common threats,” said Medvedev. “But they, unfortunately, don’t want to listen to us.”

When the Kremlin sent its tanks and soldiers into Georgia this past August, it demonstrated to the world that it is prepared to confront a Western-backed nation in the most forceful terms possible—up to and including military action, if need be. Since then foreign policy experts and politicians in Europe and the US have embarked on a vigorous debate about how best to respond to Russia’s growing assertiveness.

Their fears were further heightened in early January when Moscow, in an escalating feud with the Ukrainian government, briefly shut down pipelines running through Ukraine, which provide Europe’s principal supply of natural gas. Coming during a deep winter cold spell, the move left several Eastern European countries without heat, causing schools and factories to close—and forcing European leaders into a round of urgent diplomacy with Russia.

Few of those striving to analyze the situation, however, have gone about the task with the passion of Edward Lucas, a journalist with The Economist who has been covering Central and Eastern Europe for nearly a quarter of a century. The title of his new book, The New Cold War: Putin’s Russia and the Threat to the West, was treated by some reviewers as a bit of a stretch when it first appeared in 2008; since the conflict in Georgia and this winter’s natural gas crisis, though, it has looked more like prescience, as commentators have tripped over each other to announce the revival of geopolitical confrontation between Russia and the West.¹ Lucas is refreshingly direct:

Twenty years after Mikhail Gorbachev started dismantling communism, Russia is reverting to Soviet behavior at home and abroad, and in its contemptuous disregard for Western norms.

This is a pretty bold assertion, but Lucas immediately sets about qualifying it.

It turns out that quite a lot has changed. For one thing, Russia has embraced capitalism—albeit a form of capitalism marred by institutionalized cronyism, minimal rule of law, and endemic corruption. The ex-KGB men who returned to power with Putin have close relations with the organized crime syndicates and some of the oligarchs who played such a prominent part in the Yeltsin era. (Today’s secret policemen are quite different from the Jacobin executioners of Lenin’s day or the torturers of Stalin’s Lubyanka; modern-day Chekists, as Lucas points out, are more likely to be high-paid CEOs than ascetic servants of the state.) The result is a hybrid regime described by Putin and his supporters as “managed democracy”—in fact a markedly authoritarian system that merges select trappings of liberalism (elections, the right to own property, and the freedom to travel) with an ideological mishmash of tsarist imperialism, Soviet nostalgia, and xenophobia inspired by nationalist visions of a Greater Russia.

It does not add up to a pretty picture. Prominent critics of the regime—such as the journalist Anna Politkovskaya and the ex–secret policeman turned dissident Alexander Litvinenko—have been murdered under mysterious circumstances. Those who have tried to pose serious challenges to Putin’s hold on power—such as the former chess champion and presidential candidate Garry Kasparov and the ex–prime minister Mikhail Kasyanov—have faced official harassment. Freedom of the press, one of the few undeniably positive achievements of the Yeltsin years, has been sharply curtailed. Business interests with close ties to the state bully domestic or foreign investors out of their assets with impunity; indeed, tycoons who have defied the regime now find themselves in exile (Boris Berezovsky) or prison (Mikhail Khodorkovsky). School textbooks glorify Stalin’s leadership in World War II and pass over his crimes. In December Russian police raided the St. Petersburg office of Memorial, a human-rights organization that has chronicled Stalinist horrors, and confiscated computer disks containing thousands of interviews with victims.

And yet, as Lucas concedes, the picture is not entirely gloomy. Putin—who assumed the office of prime minister earlier this year after completing his second term as president—remains enormously popular among Russians:

For all his attacks on other freedoms, he has preserved the ones that the “new Russians” most care about. More than ever before Russians can plan their lives: they can save, educate themselves, travel, and bring up their children as they like; they can buy anything they can afford, own property at home or abroad, worship (mostly) as they like; they can even live according to their sexual preference (if not always publicly).

Though they lack the freedom to choose their elected representatives, to organize publicly to influence their government, or to change their political systems, never in Russian history have so many Russians lived so well and so freely. That is a proud boast, and one that even those who dislike Russia’s current path must honestly acknowledge.

Sky-high oil prices didn’t hurt either, of course, and now that they’ve dropped sharply as a result of the economic crisis, Russia suddenly finds itself facing straitened circumstances. Yet Putin deserves considerable credit for his cautious macroeconomic management and his success in introducing some necessary reforms (for example, implementing sensible tax policies that have dramatically boosted government revenue). Nor—despite the surge in oil wealth—did he succumb to the temptation to boost defense spending. Only recently has the Kremlin decided to reverse this course, vowing to ramp up military expenditures dramatically over the next few years. Even if the Russian government pushes ahead with these plans (which could be affected by its recent economic travails), it would still take decades to reach a level comparable to the old USSR, which at the peak spent as much as 30 percent of its GDP on defense. Right now the figure is less than one tenth of that.

Whatever else this new Russia is, in other words, the old Soviet Union it is most definitely not. So how can we reasonably speak of a “New Cold War”? While coming close to acknowledging that the label might contain a bit of hyperbole, Lucas insists that its essence applies. It is precisely Russia’s intense, revisionist nationalism, born out of the perceived humiliations of the Yeltsin period, that represents a threat not only to its own neighbors but also to Russia itself. Putin famously declared the collapse of the USSR, comparatively peaceful as it was, to be the “greatest geopolitical catastrophe of the twentieth century” (which would make it worse than the Bolshevik Revolution, Stalin’s terror, or the two world wars).

The new Russia may not intend to challenge the West throughout the globe, but according to Lucas, it clearly strives to reassert its influence regionally—particularly in Europe. It may no longer have the enormous military arsenals of Brezhnev’s day, but its armed forces—as was recently made clear in Georgia—are certainly enough to threaten or cow its neighbors. Lucas compares it to “an aggressive man on crutches.” In his book—written well before the events of last August—he notes that Russian military intervention “is unlikely in the case of Estonia, a NATO member, but conceivable in an artificially stoked conflict between Georgia and South Ossetia or Abkhazia, or both.” So he was certainly right about that. (Though he does not make specific predictions for Ukraine, he describes the ominous machinations of Kremlin-inspired groups of local “Russian citizens” in the Ukrainian territory of Crimea, something that certainly bodes ill for the future.)

The central irony of Lucas’s analysis is that Russia’s most dangerous weapon in its crusade to restore its place in the world is none other than capitalism itself. And it’s not just that Russian mobsters threaten to infiltrate Western financial institutions. The most potent foreign policy lever at the disposal of Putin and Medvedev is their country’s huge energy reserves. Russia is second only to Saudi Arabia in oil exports, but it has no serious competitors when it comes to natural gas. And gas, as it happens, is a resource that seems virtually designed for geopolitical mischief. Unlike oil, which can be transported in a variety of ways, the most practical and economical technology for transporting natural gas remains the pipeline.

Natural gas pipelines are immensely expensive. Once a line connecting a particular field with a particular consumer has been built, investors tend to be leery of putting money into duplicate or partially overlapping routes. And if the builder of the first pipeline refuses to allow it to be used by competing suppliers, consumers will be left with only one choice. This means that the monopolistic supplier can exploit its route to its own advantage in a myriad of ways—including, in the case of Russia, to exert political pressure.

And this, indeed, is precisely what Gazprom, Russia’s powerful state-dominated gas monopoly, has done. Gazprom—whose chairman during much of the Putin administration was Medvedev, the current president and close Putin ally—doesn’t just own most of Russia’s gas fields; it also controls access to the pipelines that bring that gas to markets—above all to the European Union, which despite its status as the world’s largest economy has relatively little in the way of indigenous energy resources and finds itself correspondingly dependent on Russian petroleum products. (By 2004, Russia was the sole gas supplier to Estonia, Finland, Latvia, Lithuania, Moldova, and Slovakia; and the principal supplier to Germany, Greece, Bulgaria, Hungary, Poland, Austria, the Czech Republic, and Turkey. Overall, it accounts for nearly 30 percent of the EU’s gas supply.) Gazprom has already shown its willingness to employ its stranglehold over energy supplies as a political weapon, even if it often does so in the guise of dispassionate adjustment to market realities.

As we have seen in the startling recent dispute with Ukraine, governments that disagree with Russian policy have been punished by overnight price hikes or interruptions in service. The Ukraine standoff began in the last days of 2008, ostensibly over Russia’s demand for a large increase in the price Ukraine pays for its gas; but the ensuing shutdown affected much of Europe, including leading nations such as Germany, and some analysts suggest that the standoff has been a way for Russia to warn the West about exerting too much influence in Ukrainian affairs. In fact much of the gas Russia sends westward actually comes from the Central Asian republic of Turkmenistan, which is forced to sell to the Russians at bargain-basement rates since Gazprom pipelines are the only way the Turkmens can get their gas to market.

In Europe, as Lucas explains, Gazprom has used its leverage to purchase large equity stakes in national energy companies such as ENI in Italy, BASF in Germany, and Gaz de France, which, of course, amplify its already disproportionate influence.

So what is to be done? Russia’s August invasion of Georgia proper appears to have been provoked by the Georgian government’s attack in South Ossetia. But Russia’s subsequent penetration into areas well beyond the trouble zones of South Ossetia and Abkhazia suggests that the new nationalists in the Kremlin are willing to resort to drastic measures to assert their perceived national interest—even if that comes at the cost of a sharp rise in tensions with the countries of the West. Indeed, Russia’s apparent willingness to project its sense of grievance into its foreign policy makes it a dangerous and potentially destabilizing rival.² This is not just a matter of academic concern. Europe’s energy security, and to some extent its political independence, are at stake. (Lucas notes, for example, that in relying on Gazprom, the EU is dealing with a company that not only is run by the Kremlin but also is, because of its involvement in state-run press and television, “directly linked to the end of press freedom in Russia.”)

There is also the question of the broader political and economic future of the countries like Georgia, Ukraine, and Belarus that lie along the fault line between the European Union and Russia. Georgia will continue to be at issue —not only because of its two separatist republics whose independence has now been officially recognized by Moscow, but also because it is a key point of exit to world markets for energy from the Central Asian republics.³

But the real flashpoint—the fulcrum of Eurasia’s destiny, as the recent natural gas crisis reminds us—is Ukraine, a big and unstable country that has always been a focus of geopolitical competition. A large chunk of Russia’s navy, the Black Sea Fleet, is still based in Crimea, and many Russians continue to regard Ukraine in much the same way that Serbs see Kosovo—as a heartland of their own national culture. At the same time, although more than 20 percent of the Ukrainian population are ethnic Russians, a large and apparently growing number of Ukrainians increasingly link their own national identity and historical destiny with Europe rather than their neighbor to the east. Just for good measure, lately even the “pro-democratic camp” in Kiev has been riven by the long-running feud between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, who recently traveled to Moscow for a round of surprisingly convivial negotiations with Putin. The potential for conflict should be apparent.

Lucas has some useful ideas to offer:

The regulators of the world’s financial centers must rethink how they deal with Russian (and for that matter Chinese) companies wanting to use them. The free market cannot be decoupled from the free society. The industrialized world has shown its capacity for collective action in dealing with money laundering. It could do the same for corporate governance and property rights. That would mean, for example, that any company wanting to list its shares or sell its bonds in London, New York, or Frankfurt would have to make it clear that it was engaged in a real business, not the collection of artificial rents; that its property was not stolen; and that its ownership was clear and truly private. Gazprom and [the Russian oil company] Rosneft, along with most big Russian companies, would be immediately disqualified.

Implementing such a high standard may be hard at a time of international economic turmoil. But such restrictions can be framed as positive incentives that will—by allowing greater integration of the Russian economy into Western markets and systems of regulation—contribute to economic stability back in Russia. Lucas would like to see a concerted effort to fight money laundering, including tougher action against the Western front companies that are used by Moscow’s oligarchs to sanitize corrupt profits. He would also like to see a crackdown on Russian spying in Europe and the US, which, as many security experts agree, has, in fact, reached levels comparable to the bad old days of the Soviet Union.

Measures to enforce stricter financial standards in Western marketplaces do not need to target Russia. They could be embedded in broader codes of conduct applying to the sovereign wealth funds—owned by China or various Middle Eastern companies, for example—that have become such powerful actors in international commerce in recent years. Indeed, though Lucas mentions China glancingly in this context, it would have been interesting to see him expound on this point at greater length.

Lucas also insists that Russia should only be allowed to maintain its membership in international organizations if it actually follows their rules. For example, Russia was welcomed into the European Union’s human rights forum, the Parliamentary Assembly of the Council of Europe, in 1996, at a moment when Russia aspired, more or less, to democratic standards. Now that Russia has chosen a different path—and, moreover, insists that its new one is more to its liking—Lucas writes that its membership “looks a catastrophic mistake” and should be suspended. Like John McCain during the US presidential campaign, Lucas also questions the rationale for Russia remaining a member of the Group of Eight, the club of leading industrial democracies:

Either [the G-8] should become a big-economies club (in which case China, India and Brazil should join), or it is a body for rich countries that respect the rule of law and political freedom. In that case Russia does not even belong in the waiting room.

The G-8’s function is largely symbolic to begin with, and I’m not sure what purpose Russia’s exclusion would ultimately serve, but he certainly has a point about the need to redefine the group.

Interestingly, Lucas eschews sanctions, rightly pointing out that they have usually proven ineffective, “create wonderful opportunities for corruption,” and contribute to isolationism. He’s also refreshingly skeptical about supporting “democracy assistance” programs inside Russia, arguing that, under current conditions, they will be taken by many Russians as evidence of continued Western interference. What he insists upon very strongly is that Europe must make every effort it can to reduce its dependency on Russian energy supplies by creating a Europe-wide energy market with diversified sources of supply. (Right now that market is divided up into fragmented national grids that all too often end up operating at cross-purposes.)

Somewhat confusingly, given his clear preference for market solutions, Lucas argues at the same time that European countries should cooperate in developing pipelines that would connect their market with Central Asian suppliers such as Turkmenistan and Kazakhstan while bypassing Russian intermediaries⁴ —even if investors are unwilling to shoulder all the risk themselves. In this case, he says, pipeline policy is a matter of national security—and “national security is a job for politicians, not those in business.” Indeed, while many economists might argue that the experience of East Asia in particular demonstrates that successful capitalism doesn’t necessarily have to coincide with liberal democracy, Lucas turns the argument on its head:

If you believe that capitalism is a system in which money matters more than freedom, you are doomed when people who don’t believe in freedom attack using money.

Markets, he argues, should be subordinated to freedom, not the other way around. This is actually something of an intellectual leap, and it will be interesting to see how such ideas develop as the liberal democracies continue to be challenged by authoritarian capitalism—particularly in the aftermath of the current financial crisis.

Perhaps most controversially, Lucas believes that offering NATO membership to Georgia and Ukraine is a key component of any strategy for constraining Russian designs on its neighbors. Opponents of the previous enlargement of NATO—including, of course, many Russians—say that expanding membership to members of the former Warsaw Pact was an insult to Russian sensitivities and a threat to Russian security. What this argument ignores is that NATO enlargement had a positive influence in knitting together a region that might otherwise have fallen into chaos. Contrary to popular belief, NATO enlargement was driven less by a grasping, hegemonic United States than by the desire of Washington’s European allies to stabilize the belt of newborn democracies to the east. There is no question that they have succeeded in this aim.

Just as the opportunity to join the EU compelled many countries in the region to undertake difficult political and economic reforms, NATO’s requirement that candidate countries resolve border conflicts with their neighbors before they can be admitted forced would-be members to confront and air old historical grievances that could have easily poisoned the region’s future. In the early 1990s, for example, Hungarian nationalist leader Jozsef Antall described himself as the “Prime Minister of 15 million Hungarians”—that is, including five million ethnic Hungarians in Slovakia, Romania, and Serbia—and vowed to defend them against alleged discrimination there. Italy and Slovenia, Lithuania and Poland, and Germany and the Czech Republic all had to confront long-running historical disputes with one another. The security benefits of NATO membership provided a powerful incentive to defuse these controversies. NATO also forced aspirant countries to consolidate civilian control over their militaries.

This success, now widely acknowledged, could not have been achieved without a firm political will to reconciliation among all the sides concerned. In the case of both Georgia and Ukraine, by contrast, there are few signs that such conditions can be fulfilled anytime soon. Russia may have done an effective job of exploiting and aggravating these divisions, but the dispute between ethnic Georgians and the ethnic minorities concentrated in Abkhazia and South Ossetia has a long and rocky history that is now, if anything, much farther away from being satisfactorily resolved than it was before Tbilisi attacked the South Ossetians this past August—thereby offering the Russians a perfect excuse for intervention.⁵ Unless Georgia can make progress on these issues, allowing it to join the alliance would represent a betrayal of NATO’s own principles.

The situation with Ukraine is, if anything, more complicated. Were a pro-Western government in Kiev to vote on NATO accession, political turmoil would immediately ensue. The eastern part of the country—dominated by Russia and with a large proportion of Russians—would almost certainly respond with mass protests, possibly culminating in violent opposition to the central government or demands for secession. The consequences in the Crimea—where, as rumor has it, Moscow has been issuing Russian passports to local sympathizers just as it has done in Abkhazia and South Ossetia—would probably be even more explosive. The attempt would probably rebound to devastating effect on NATO itself, which would almost certainly find itself deeply divided over how to respond.⁶

In truth, not many of the European members of NATO are particularly enthusiastic about the prospect of admitting Georgia and Ukraine to the group —even if Russia’s actions in Georgia pushed many hitherto hesitant countries (most notably Germany) into publicly endorsing the possibility of membership down the road. It is problems like this that Lucas has in mind when he insists, throughout his book, that the West must be united if it is to formulate anything like a serious response to the rising Russian threat.

The reality is that there has never been less of a sense of common cause between Europe and the United States since the end of World War II than there is today. These are not good times for Atlanticists, and the reasons run much deeper than European dissatisfaction with the policies of the Bush administration. Since the late 1980s and the collapse of the Soviet empire, historical circumstances have pushed the United States into a quasi-imperial position at a time when Europe’s consolidation has given it a renewed sense of its own economic power and “post-national” destiny. It was Madeleine Albright, not Donald Rumsfeld or Condoleezza Rice, who referred to the US as the “indispensable nation,” and though President-elect Obama has emphasized the need to pay more attention to the wishes of our allies and the broader international community, there is little to suggest that he disputes the fundamental premise of a leading role for the US. Of course, this view of America’s dominance seems particularly ironic at a time when more and more countries around the world have adopted their own versions of market economics and democratic institutions—meaning that America, in that sense, has become more dispensable than it was when the cold war, the real, bipolar, Manichaean cold war, divided the world fairly neatly into friends and foes.

This is one reason why talk of a “New Cold War” ultimately misses the mark. The other is that Russia, contrary to all the feverish talk about its presumed status as a revived superpower, is nothing of the kind. It is a rising regional power that enjoys the benefit of immense geographical reach and huge natural resources. Yes, it has a nuclear arsenal and a big army—but, as Lucas correctly notes, the former is outdated and poorly maintained, and the latter, as its less-than-stellar performance against Georgia’s tiny army demonstrated, is still a long way away from a state-of-the-art modern force.⁷

Meanwhile, the financial crisis has dramatically highlighted the anemic basis of Russia’s supposedly formidable economy. The impending recession, and a corresponding fall in commodity prices, had been depressing Russian markets even before August. Since then, as a result of its attack on Georgia, Russia’s international image has deteriorated sharply, and investors both domestic and foreign have bolted. As a result, the past few months have seen Russia’s stock markets lose up to 75 percent of their value; Moscow’s once feverish stock exchanges had to be shut down repeatedly to stanch the panic.

Meanwhile, the country’s extraordinary demographic decline—aggravated by a nationwide drug and alcohol epidemic, a catastrophically underfunded health system, and the rapid spread of AIDS—continues seemingly unchecked.⁸ On this count, the supposedly benevolent despots in today’s Kremlin have done little to improve on the dismal record of Boris Yeltsin. An insecure Russia, of course, is no good for anyone—least of all Russians. There seems little that the outside world can do to help. Russia is undoubtedly capable of acting as a positive force in its region. But only Russia itself can decide whether it wishes to play such a role.

One good start, though, might be to exercise a bit more caution in how we employ historical analogies. In reality we are not entering a “New Cold War” or anything like it. What we are facing is the messy challenge of figuring out where a big, ailing, mournfully post-imperial Russia fits into the chaotic twenty-first century. That can’t be done by giving Russia a pass when it comes to obeying the basic rules of international discourse. Treating Russia like an eternal enemy—one that deserves only isolation and quarantine—probably won’t be very effective, either. Finding the way between these two paths must be tried, and it won’t be easy.

—January 14, 2009