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Russia's Unlikely Diplomat - Vladimir Putin

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Back in 2003, I attended the APEC CEO Summit in Bangkok. Vladimir Putin gave a speech and on stage he was an imposing, commanding figure, in good form and perhaps at the height of his political power. After the speech, I slipped out a side door in order to leave the conference a bit early, and in the hallway, I ran straight into President Putin. Well, almost. His army of security guards prevented an actual collision, but the way everyone reacted left me shaken. Putin looked smaller than I expected, but he had a kind of wiry energy and menacing presence that seemed totally at odds with the image he had projected from the stage minutes earlier. I will not forget his eyes.

Ten years later, President Putin is still cropping up in unexpected places: in the op-ed pages of the New York Times, as the grantor of asylum to a recently famous American citizen, and as the leading diplomatic negotiator in the Middle East. Russia now appears to be playing the role of peacemaker with two of the three 'Axis of Evil' countries, Syria and Iran. Can North Korea be far behind?

What is driving Russia, and Putin's push into diplomacy? According to a new book, Fragile Empire, by author Ben Judah (Yale University Press), we should be careful about our interchangeable use of the words Putin and Russia. A Russia analyst and journalist who doesn't limit himself to Moscow and St Petersburg, Judah says that Russians have fallen out of love with Vladimir Putin and he documents his case with interviews throughout the country. Although the author doesn't see a collapse of the Russian state anytime soon, he can foresee a time when Putin is forced from power. This is an important scenario to consider on several levels. And it might enlighten us as to the motivation for his recent diplomatic overtures.

Is Putin motivated by fear, or is it ego? Ian Bremmer, the head of Eurasia Group, writes that "it has been a summer of shallow wins for Putin as he puts his ego and personal quest of international legitimacy over his country's best interests." I doubt that Putin would see it that way, but to understand him we need to see what he fears. He believes that his country's best interests lie in not falling apart, which is the central doctrine of Putinism, backed by his core belief -- "Above all, we should acknowledge that the collapse of the Soviet Union was a major geopolitical disaster of the century." Judah explains:

>Putinism is apocalyptic. The project is presented as nothing less than Russian's last chance to survive as a state: 'Russia will be a great power or she will not be at all.' The fear that should he fail the country would fall into anarchy, pulled the establishment together. There was still widespread fear that Russia could collapse again. In private, many expressed their fears that Russia could within a few decades cease to exist. Demographics, China, Muslims, oil price crashes... there were many demons.

To outsiders, Putin's new role in the Middle East represents Russia's resurgence as a super power, and this is indeed just what Putin wants and needs in order to shore up his credibility at home. Accustomed to our prima donna role on the world stage for decades, Americans are becoming worried. For the first time since Glasnost, the majority of U.S. citizens now see Russia as an enemy. According to a new Gallup poll, Carol J. Williams of the LA Times reports that "Despite the general decline in Americans' esteem for Russia and Putin suggested by the survey, a strong majority supported the U.S.-Russian collaboration on the Syrian chemical weapons disposal plan, with 72% approving and 18% opposed." Only 19 percent, however, approve of Putin personally, and only 44 percent feel that Russia is an ally, down from 52 percent only three months ago.

So why should Putin be worried? The reality is that Russia faces a host of internal challenges. For the first time since Russia became a member of the BRIC's, Russia's growth rate has fallen to under 2 percent, below the world's average. The fabulous wealth that was created by the oil and resources boom was not spent on infrastructure or on making Russia more competitive. Instead, Russia's wealth became concentrated in the hands of a feuding oligarchy, ruled by Putin with an iron hand.

In spite of the recent positive PR Putin is generating, Russia is a state of decline. Her economy is doomed, according to political economist Robert Skidelsky, writing in the Guardian:

Russia's domestic situation remains deplorable. With the collapse of the planned economy in 1991, Russia proved to be not so much a developed as a misdeveloped country, unable to sell most of its products in non-captive markets.

So Russia regressed into a commodity-based economy, mainly selling energy, while its talented scientists and technicians sought jobs abroad and its intellectual life decayed. Russia is also, no surprise, blighted by corruption, which drives away foreign investment and costs the country billions of dollars annually.

This underlying debility has been masked by high energy prices, which, over the 14 years of President Vladimir Putin's rule, have allowed Russia to combine the features of a kleptocracy with per capita income growth sufficient to quell dissent and create a shopping-mad middle class. The accumulation of reserves from the oil and gas industries can be used to develop much-needed infrastructure. But, for all the Kremlin's talk of diversification, Russia remains an economy with a Latin American, rather than a western profile.

One example: Russia's largest state-owned energy company, Gazprom, used to supply significant revenues to the state, but mismanagement has lead to investments in a series of multi-billion pipelines to nowhere. Anders Aslund, senior fellow at the Peterson Institute for International Economics, is even predicting that Gazprom's collapse could topple Putin.

The silver lining of the Gazprom crisis is that by becoming too corrupt to work, it has caused its own demise. It will no longer be able to dominate Russian politics and the country will become less of a petro state. This must be greeted with relief by all true friends of Russia.

Lest we become too gloomy, the idea that Russia itself is a dying country is a popular misconception, at least for the medium term. It is the largest Internet market in Europe. Beginning in 2003 Russia's life expectancy has increased to an all-time high, although at nearly 70 years it is still a decade short of the U.S. rate. Russian fertility increased and in fact surpassed the U.S. recently -- how did this happen? According to Forbes contributor and Russia expert Mark Adomanis,

Essentially, Russian wages have never been higher and unemployment has never been lower. Meanwhile, in the United States, wages are stagnant and unemployment is way above its long-term trend. This sort of economic malaise has had a predictably depressive effect on fertility.

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However, low unemployment and high wages are also the basis of inflation. And Adomanis gives no credit to Putin for more positive demographics.

What is not particularly relevant for the discussion are the personalities of Barack Obama and Vladimir Putin: neither deserves much credit (or blame) for their respective country's performance. Fertility is notoriously immune to state interventions... the reality is that most of the change is due to structural demographic and economic factors that are incredibly difficult to change. So Russia's relatively good performance doesn't automatically vindicate Putin and the US poor performance doesn't "prove" that Obama is awful.

So back to Putin's weaknesses at home. Here Fragile Empire does an exemplary job of explaining what has happened in the various power struggles won by Putin, such as with, Boris Berezovsky, Vladimir Gusinsky, and Mikhail Khodorkovsky. Khodorkovsky, an oil company entrepreneur who was fabulously rich and planned to oppose Putin for the presidency, was no saint, but the battle was over political power, not money.

Fragile Empire also gives lie to Putin's claim that Russians in the countryside love him. Opposition to Putin comes not just from high places, in the provinces ("Russia has not found its borders") Judah tells the story of a group of young men in Siberia who went on a murderous rampage against corruption and drug dealing by the local policy. The Primorski Partisans made a video that went viral in Russia, and then they were hunted down. Judah interviewed their parents, and neighbors, and it is clear that Putin and the oil money has failed in building the institutions that create barriers to corruption most especially in the hinterlands. The boys became heroes to people everywhere in Russia who have grown weary of drug-dealing policemen.

More recently, Alexei Navalny, a 37-year-old leading opposition leader, was sentenced to prison, and then ran for mayor of Moscow. His election appeal was denied last week, but even as he heads to prison he has strong support from the young and the tech-savvy. Evidently, Putin is not loved much by the sophisticates of Moscow either, and has been staying outside the capital, so as to "not tie up traffic." My impression is that Putin became the leader of the oligarchs when he put down Khodorkovsky, his real rival, but when the oil money runs out, he is doomed. Until then, can we align our diplomatic interests with his domestic imperatives?

Syria is not about Syria; it is about Putin's view of sovereignty. According to Fiona Hill at the Brookings Institute, Putin declared in 2005 that the demise of the Soviet Union was "the greatest geopolitical catastrophe of the twentieth century."

Putin is really motivated to support the Assad regime by his fear of state collapse--a fear he confronted most directly during the secession of Russia's North Caucasus republic of Chechnya, which he brutally suppressed in a bloody civil war and counterinsurgency operation fought between 1999 and 2009.

Economic deterioration, continued weakness in Europe, profound institutional weaknesses, contracting energy demand, companies driven more by greed than global competition, rivals in the wings who gain strength as popular disgust with an epidemic of corruption grows, and growing competition from China, especially in the Far East. What does Putin have to look forward to? The Winter Olympics in Sochi, a hop, skip, and a jump from Chechnya might not be the antidote to Russia's economic and political ills. As Ian Bremmer explains,

Nor is the honor of hosting the Olympics an economic boon for Russia--although it certainly will be for Putin's closest friends. The Games are now 500 percent over budget, the most expensive of all time--and that money is largely going to corruption rather than any infrastructural investment that might continue to pay dividends to the Russian people. (The $7+ billions in contracts awarded to the companies of a single childhood friend of Putin's exceeded the entire budget of the last Winter Olympics in Vancouver.) Expect public protests and international scrutiny to transform the Games into a referendum on Russia's record on political freedoms and human rights.

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China seems to have created a smoother integration into the world economy than Russia. I have often thought that this is because when China opened up in 1979, there were still people in living memory who ran real businesses prior to the revolution in 1949. There was also a cohort of Chinese entrepreneurs around the world in outposts like the US, Taiwan, and Hong Kong, who grew those businesses in an environment where the rule of law was already in place. And some of them came back to China.

Russia's revolution took place in 1917. Commercial institutional memory had been erased by the time Boris Yeltsin came into power. Moreover, Russia had no Taiwan; its territories had all been under Soviet, and hence Communist rule. Both countries are still experiencing the ravages of corruption, which is most helpfully understood as developmental issue, rather than a moral concept. Both China and Russia will continue to experience turbulence as these issues work themselves out. But after reading Fragile Empire, I am convinced that Vladimir Putin could be on shaky ground as a politician. If that is the case, we should work with him as a diplomat, while we can, to resolve any issues we can in the Middle East. It would be truly ironic if Putin were the man who leads us to reconciliation with Iran. It could be his most enduring global legacy. Let's see if we can sneak in North Korea while we are at it.

2011-11-13-8.jpgThis post originally appeared at the Yale Books blog.

What's Next? Unconventional Wisdom on the Future of the World Economy by David Hale and Lyric Hale is available now from Yale University Press.

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