Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Can Putin Survive?

Politics / Russia Jul 22, 2014 - 11:04 AM GMT

By: STRATFOR

Politics

George Friedman writes: There is a general view that Vladimir Putin governs the Russian Federation as a dictator, that he has defeated and intimidated his opponents and that he has marshaled a powerful threat to surrounding countries. This is a reasonable view, but perhaps it should be re-evaluated in the context of recent events.


Ukraine and the Bid to Reverse Russia's Decline

Ukraine is, of course, the place to start. The country is vital to Russia as a buffer against the West and as a route for delivering energy to Europe, which is the foundation of the Russian economy. On Jan. 1, Ukraine's president was Viktor Yanukovich, generally regarded as favorably inclined to Russia. Given the complexity of Ukrainian society and politics, it would be unreasonable to say Ukraine under him was merely a Russian puppet. But it is fair to say that under Yanukovich and his supporters, fundamental Russian interests in Ukraine were secure.

This was extremely important to Putin. Part of the reason Putin had replaced Boris Yeltsin in 2000 was Yeltsin's performance during the Kosovo war. Russia was allied with the Serbs and had not wanted NATO to launch a war against Serbia. Russian wishes were disregarded. The Russian views simply didn't matter to the West. Still, when the air war failed to force Belgrade's capitulation, the Russians negotiated a settlement that allowed U.S. and other NATO troops to enter and administer Kosovo. As part of that settlement, Russian troops were promised a significant part in peacekeeping in Kosovo. But the Russians were never allowed to take up that role, and Yeltsin proved unable to respond to the insult.

Putin also replaced Yeltsin because of the disastrous state of the Russian economy. Though Russia had always been poor, there was a pervasive sense that it been a force to be reckoned with in international affairs. Under Yeltsin, however, Russia had become even poorer and was now held in contempt in international affairs. Putin had to deal with both issues. He took a long time before moving to recreate Russian power, though he said early on that the fall of the Soviet Union had been the greatest geopolitical disaster of the 20th century. This did not mean he wanted to resurrect the Soviet Union in its failed form, but rather that he wanted Russian power to be taken seriously again, and he wanted to protect and enhance Russian national interests.

The breaking point came in Ukraine during the Orange Revolution of 2004. Yanukovich was elected president that year under dubious circumstances, but demonstrators forced him to submit to a second election. He lost, and a pro-Western government took office. At that time, Putin accused the CIA and other Western intelligence agencies of having organized the demonstrations. Fairly publicly, this was the point when Putin became convinced that the West intended to destroy the Russian Federation, sending it the way of the Soviet Union. For him, Ukraine's importance to Russia was self-evident. He therefore believed that the CIA organized the demonstration to put Russia in a dangerous position, and that the only reason for this was the overarching desire to cripple or destroy Russia. Following the Kosovo affair, Putin publicly moved from suspicion to hostility to the West.

The Russians worked from 2004 to 2010 to undo the Orange Revolution. They worked to rebuild the Russian military, focus their intelligence apparatus and use whatever economic influence they had to reshape their relationship with Ukraine. If they couldn't control Ukraine, they did not want it to be controlled by the United States and Europe. This was, of course, not their only international interest, but it was the pivotal one.

Russia's invasion of Georgia had more to do with Ukraine than it had to do with the Caucasus. At the time, the United States was still bogged down in Iraq and Afghanistan. While Washington had no formal obligation to Georgia, there were close ties and implicit guarantees. The invasion of Georgia was designed to do two things. The first was to show the region that the Russian military, which had been in shambles in 2000, was able to act decisively in 2008. The second was to demonstrate to the region, and particularly to Kiev, that American guarantees, explicit or implicit, had no value. In 2010, Yanukovich was elected president of Ukraine, reversing the Orange Revolution and limiting Western influence in the country.

Recognizing the rift that was developing with Russia and the general trend against the United States in the region, the Obama administration tried to recreate older models of relationships when Hillary Clinton presented Putin with a "restart" button in 2009. But Washington wanted to restore the relationship in place during what Putin regarded as the "bad old days." He naturally had no interest in such a restart. Instead, he saw the United States as having adopted a defensive posture, and he intended to exploit his advantage.

One place he did so was in Europe, using EU dependence on Russian energy to grow closer to the Continent, particularly Germany. But his high point came during the Syrian affair, when the Obama administration threatened airstrikes after Damascus used chemical weapons only to back off from its threat. The Russians aggressively opposed Obama's move, proposing a process of negotiations instead. The Russians emerged from the crisis appearing decisive and capable, the United States indecisive and feckless. Russian power accordingly appeared on the rise, and in spite of a weakening economy, this boosted Putin's standing.

The Tide Turns Against Putin

Events in Ukraine this year, by contrast, have proved devastating to Putin. In January, Russia dominated Ukraine. By February, Yanukovich had fled the country and a pro-Western government had taken power. The general uprising against Kiev that Putin had been expecting in eastern Ukraine after Yanukovich's ouster never happened. Meanwhile, the Kiev government, with Western advisers, implanted itself more firmly. By July, the Russians controlled only small parts of Ukraine. These included Crimea, where the Russians had always held overwhelming military force by virtue of treaty, and a triangle of territory from Donetsk to Luhansk to Severodonetsk, where a small number of insurgents apparently supported by Russian special operations forces controlled a dozen or so towns.

If no Ukrainian uprising occurred, Putin's strategy was to allow the government in Kiev to unravel of its own accord and to split the United States from Europe by exploiting Russia's strong trade and energy ties with the Continent. And this is where the crash of the Malaysia Airlines jet is crucial. If it turns out -- as appears to be the case -- that Russia supplied air defense systems to the separatists and sent crews to man them (since operating those systems requires extensive training), Russia could be held responsible for shooting down the plane. And this means Moscow's ability to divide the Europeans from the Americans would decline. Putin then moves from being an effective, sophisticated ruler who ruthlessly uses power to being a dangerous incompetent supporting a hopeless insurrection with wholly inappropriate weapons. And the West, no matter how opposed some countries might be to a split with Putin, must come to grips with how effective and rational he really is.

Meanwhile, Putin must consider the fate of his predecessors. Nikita Khrushchev returned from vacation in October 1964 to find himself replaced by his protege, Leonid Brezhnev, and facing charges of, among other things, "harebrained scheming." Khrushchev had recently been humiliated in the Cuban missile crisis. This plus his failure to move the economy forward after about a decade in power saw his closest colleagues "retire" him. A massive setback in foreign affairs and economic failures had resulted in an apparently unassailable figure being deposed.

Russia's economic situation is nowhere near as catastrophic as it was under Khrushchev or Yeltsin, but it has deteriorated substantially recently, and perhaps more important, has failed to meet expectations. After recovering from the 2008 crisis, Russia has seen several years of declining gross domestic product growth rates, and its central bank is forecasting zero growth this year. Given current pressures, we would guess the Russian economy will slide into recession sometime in 2014. The debt levels of regional governments have doubled in the past four years, and several regions are close to bankruptcy. Moreover, some metals and mining firms are facing bankruptcy. The Ukrainian crisis has made things worse. Capital flight from Russia in the first six months stood at $76 billion, compared to $63 billion for all of 2013. Foreign direct investment fell 50 percent in the first half of 2014 compared to the same period in 2013. And all this happened in spite of oil prices remaining higher than $100 per barrel.

Putin's popularity at home soared after the successful Sochi Winter Olympics and after the Western media made him look like the aggressor in Crimea. He has, after all, built his reputation on being tough and aggressive. But as the reality of the situation in Ukraine becomes more obvious, the great victory will be seen as covering a retreat coming at a time of serious economic problems. For many leaders, the events in Ukraine would not represent such an immense challenge. But Putin has built his image on a tough foreign policy, and the economy meant his ratings were not very high before Ukraine.

Imagining Russia After Putin

In the sort of regime that Putin has helped craft, the democratic process may not be the key to understanding what will happen next. Putin has restored Soviet elements to the structure of the government, even using the term "Politburo" for his inner Cabinets. These are all men of his choosing, of course, and so one might assume they would be loyal to him. But in the Soviet-style Politburo, close colleagues were frequently the most feared.

The Politburo model is designed for a leader to build coalitions among factions. Putin has been very good at doing that, but then he has been very successful at all the things he has done until now. His ability to hold things together declines as trust in his abilities declines and various factions concerned about the consequences of remaining closely tied to a failing leader start to maneuver. Like Khrushchev, who was failing in economic and foreign policy, Putin could have his colleagues remove him.

It is difficult to know how a succession crisis would play out, given that the constitutional process of succession exists alongside the informal government Putin has created. From a democratic standpoint, Defense Minister Sergei Shoigu and Moscow Mayor Sergei Sobyanin are as popular as Putin is, and I suspect they both will become more popular in time. In a Soviet-style struggle, Chief of Staff Sergei Ivanov and Security Council Chief Nicolai Patryushev would be possible contenders. But there are others. Who, after all, expected the emergence of Mikhail Gorbachev?

Ultimately, politicians who miscalculate and mismanage tend not to survive. Putin miscalculated in Ukraine, failing to anticipate the fall of an ally, failing to respond effectively and then stumbling badly in trying to recoup. His management of the economy has not been exemplary of late either, to say the least. He has colleagues who believe they could do a better job, and now there are important people in Europe who would be glad to see him go. He must reverse this tide rapidly, or he may be replaced.

Putin is far from finished. But he has governed for 14 years counting the time Dmitri Medvedev was officially in charge, and that is a long time. He may well regain his footing, but as things stand at the moment, I would expect quiet thoughts to be stirring in his colleagues' minds. Putin himself must be re-examining his options daily. Retreating in the face of the West and accepting the status quo in Ukraine would be difficult, given that the Kosovo issue that helped propel him to power and given what he has said about Ukraine over the years. But the current situation cannot sustain itself. The wild card in this situation is that if Putin finds himself in serious political trouble, he might become more rather than less aggressive. Whether Putin is in real trouble is not something I can be certain of, but too many things have gone wrong for him lately for me not to consider the possibility. And as in any political crisis, more and more extreme options are contemplated if the situation deteriorates.

Those who think that Putin is both the most repressive and aggressive Russian leader imaginable should bear in mind that this is far from the case. Lenin, for example, was fearsome. But Stalin was much worse. There may similarly come a time when the world looks at the Putin era as a time of liberality. For if the struggle by Putin to survive, and by his challengers to displace him, becomes more intense, the willingness of all to become more brutal might well increase.

This analysis was just a fraction of what our Members enjoy, Click Here to start your Free Membership Trial Today! "This report is republished with permission of STRATFOR"

© Copyright 2014 Stratfor. All rights reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis.

STRATFOR Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules