Updated: May 12, 2018
In March 2018, Angela Merkel along with Xi Jinping and Vladimir Putin have secured their fourth terms in office. While the German Chancellor achieved this with a bitter coalition deal, giving up top portfolios to the Social Democrats (SPD), Xi Jinping has managed the unanimous approval from China's legislature with no limits on the number of terms he can serve. To further sweeten the deal, President Xi has been able to retain his core loyalists, which includes Wang Qishan as vice-president and Li Keqiang as prime minister.
However for the scope of this article, we shall turn our attention to Russia where Vladimir Putin has secured a victory with a massive 77 percent of the vote, more than the 65, 71 and 52 percent polled in the last three elections since 2000, when he first came to power. With the campaign slogan "Strong President, Strong Russia", where is Putin's Russia headed in the coming years?
THE IRON HAND
From Soviet spy to the President of Russia, Vladimir Putin has now served as President of Russia for 14 years. His impact on Russia has been so pervasive that most people born after the fall of the Soviet empire don't remember a time when he wasn't at the helm of the nation's affairs. Although he took a break from the Presidency in 2008-2012 in order to serve as Prime Minister (and to circumvent the consecutive term limit), many saw Putin pulling strings from behind the scenes like a puppet master and with the term limit being revised to 6 years from 4, we shall be seeing him in office till 2024.
Being a KGB agent strongly influenced Putin's political way of thinking early on - both in terms of strategy and execution. As a KGB officer working in East Germany, Putin saw the effects of the end of the Cold War and the fall of communism. The external circumstances of global politics molded him into a politician who wanted to fix things in Russia such as the struggling post-Soviet economy in order to remain a global power. It was during the early years of his presidency that we learned he was still focused on how the breakup of the Soviet Union had negatively affected Russia and Putin’s Russia has since become increasingly authoritarian, including limitations on free speech and the media and the arrest and alleged murder of political opponents and journalists. Often criticized for his consolidation of power and dilution of state bodies, there are few in Russia who dare to oppose him.
In 2014, Russia successfully annexed Crimea from Ukraine. In fact the first round of the Russian presidential election in 2018 was on March 18 - the exact date that Russia annexed Crimea, which Putin saw as a huge victory and which boosted his approval ratings domestically - even if it caused great concern to the rest of the world. Putin won more than 90% of votes in Crimea and Sevastopol, which raises questions about the legitimacy of the 2018 elections. His main goal now is to continue to expand Russian power globally - at home and abroad. While news of Russian interference in the U.S. elections has dominated the media, we should pay closer attention to what Russia is doing politically in Venezuela and Libya, as well as the Middle East and Europe. Putin still wants Russia to rival the U.S. as a superpower, and he’s stepping in where the Trump administration is stepping out which is sure to have a significant impact on the world.
THE RUSSIAN ECONOMY
By the 1970s the Soviet Union had entered the era of stagnation, the complex demands of the modern economy and inflexible administration overwhelmed and constrained the central planners from 1975 to 1985 with corruption and data fiddling being common practice. Gorbachev's policy of perestroika set off a process of political and economic disintegration culminating in the breakup of the Soviet Union in 1991 and since the fall of communism, Russia has undergone a radical transformation moving from a centrally planned economy to a globally integrated market economy.
Russia relies on energy revenues to drive most of its growth with an abundance of oil, natural gas and precious metals making up a major share of its exports. The main industries operating in Russia are petro-chemicals, metals, aircrafts, space vehicles and defence equipments.
Today Russia's economy is at a turning point following a decade of spectacular growth fuelled by high energy prices. The country could either use its newfound riches to finance much-needed modernization and become a driver of innovation or meddle through by continuing to rely on its large yet maturing hydrocarbon base.
Dwindling oil prices and sanctions in response to the annexation of Crimea had forced Putin to use Russian Sovereign Wealth Funds to cover the budget deficits but in the process, the government nearly depleted its capital reserves. As of January 2018, it is estimated that only $17 billion remain in these Funds. In recent years, a dozen regional authorities have drowned themselves in debt while the central government in Moscow has maintained a low national debt level. For some, the conditions are so severe that they failed to pay the federal taxes to Moscow. Moscow purged a record 19 governors and hundreds of banks have been nationalized and closed all over the country due to rampant corruption and incompetence in the regional administrations.
The Liberals believe that the only option is to liberalize the Russian economy and decrease the role of the highly centralized bureaucracy which often deters investment in the country. They propose channeling the military and security funds towards healthcare and education. If Russians can work longer and gain better skills, it will improve the economy. However the Conservatives fear that the privatization program and reforms would encourage social unrest across the country. They want the government to play an even greater role to protect national security. To that end they want Moscow to sharply reduce interest rates to enable the Central Bank to print more money and subsequently take on more debt. The idea is that this would allow state owned companies to borrow funds with a discount and invest that money in their respective Industries.
Although the liberals have powerful ties to Kremlin, they are rivaled by the conservatives and state owned businesses. While they would like to reform taxes, decrease bureaucracy, improve law enforcement, confront corruption, bolster the infrastructure, modernize manufacturing industries and create a more sustainable pension system; the proposal for state backed investment is supported by most oligarchs and Industrialist as they stand to gain significantly from government funded Institutions of credit.
The Russian economy is inherently linked to the country's political system and Russians have always put political security above financial growth. Their foremost priority shall always be to maintain macroeconomic stability at all costs which means low budget deficit = low inflation and low levels of debt. The preference of politics over economics also determines Russia's social benefits policy. Putin has dealt with the current economic crisis by reducing funds for education and healthcare to keep pensions and social benefits steady. This attitude has come at the expense of human capital and money is being invested in political stability to allow the private sector to operate freely in sectors that do not compromise the government's geo-political policies and capabilities.
An important ally in Russia's Economic reform is China, with its 'Belt and Road' initiative (BRI) which includes passage through Russia to Europe, including the UK. To facilitate this endeavour, Putin's emphasis has turned to improving connectivity, within Russia and outside. Improving the railway network, ports and roads with Chinese assistance is a sharp contrast to Moscow's initial opposition, in favour of its own Eurasian Economic Union which seems to have been forgotten for the moment. With current sanctions following the alleged "Spy Poisoning", it is unlikely that Russia would manage to bankroll its infrastructure push, especially in light of political difficulties involved in reforming key industries.
MILITARY AND SECURITY REFORMS
Economic reforms hint at a simple truth - Putin is rather predictably focused on the might of the Russian Armed Forces, particularly its nuclear forces. Russia was fundamentally limited in its maritime power because it had no easy way to access the world's oceans year round, the port of Novorossiya is limited by the depth and size, St. Petersburg port freezes for many months of the year and on the Pacific side ports like Vladivostok also occasionally freezes during the winter. The other problem is that their access to the world's oceans is through choke points controlled by either NATO countries or NATO allies like Japan.
Russia used its influence in Ukraine to sign a long-term lease on the warm water port of Sevastopol, Crimea was in reality a strategic imperative to keep the warm water port of Sevastopol. The Russians have managed to overcome many of their geographic challenges partially because of two things: oil and natural gas. Russian pipelines provide for 40 percent of Europe's natural gas demand some countries are almost fully dependent on Russia for their natural gas. This gas dependency is a major reason a country with high Russian oil dependency is much less likely to criticize Russia than a country like the UK which has virtually zero Russian gas dependency. Putin's policies on weaponry were tested in Ukraine and the Crimea, and later the Russian role in Syria. Moscow again got a warm water port debouching into Europe, and further consolidation through Tartus in Syria.
Other than pure military might, Putin's government has increasingly relied on the intelligence apparatus and security services to maintain power and overall stability both domestically and internationally. The National Guard also known as the Rosgvardiya was created by Putin in 2016 and reports directly to him, the agency is the result of upheaval when the Kremlin purged more than a dozen regional governors for failing to pay federal taxes. In the previous year, it made substantial advances as it set up its own unit for cybersecurity and assumed the protection duties for regional leaders, both areas which used to be the purview of the FSB. The rapid surge of Rosgvardiya displays that the president has more faith in his own agency than the FSB and it is speculated that in this term Putin will seek to reshuffle the authorities of the security services in favor of the Rosgvardiya. By doing so of the president will gain direct control over a single body to respond to unrest across the country.
Apart from annexing foreign territories and re-constituting the internal security apparatus, new intercontinental ballistic missiles are said to have been handed over, a new 'Sarmat' missile- which is supposedly able to manoeuvre within the United States anti-ballistic missile (ABM) effort has been developed, a very long range stealth missile and unmanned long-range submarines are finding their place in Russia's arsenal. Russia is once again a world leader in weaponry and its beginning to look like the inception of an arms race again.
Strong President, Strong Russia?
Two communists, two ultra-nationalists, a socialite, a businessman and a liberal stood in an election against the world's most recognizable Russian man, while the anti-corruption campaigner Aleksei Navalny - the Putin opponent who has received the most media exposure outside Russia - was officially excluded from the race in December by the country’s electoral commission.
Russia's political landscape is a minefield, one that Vladimir Putin has been able to navigate for the past 14 years. The next six years however, will be the real test of his leadership. The question is, can he reinvent Russia to take on the challenges and emerge as a global power? The scientist, the "chai-walla", the reality TV host and the soviet spy, while short-term trends are cloudy, the future is exciting.