The Finnish Residence
After leaving the diplomatic service, I worked six years for Finnish Industry, which took me back again to Moscow and Russia. Business always assesses risks and it has been clear to all players that trading with Russia involves risks. The default of 1998 was still fresh on everybody’s mind. Some of the players were burned children but still they decided to come back. Risk is part of business and Russia is no exception. As an oil executive put it, all our exploration activities are located in high-risk areas and Russia is not the worst case.
How to assess this risk was not easy and it did not seem like a burning issue when the market was good and exports boomed. I have to admit that although I did underline that trading with Russia always involves country risk I failed to consider it the critical issue. Who could have foreseen that this country risk would materialize fully? The Eastern Partnership initiative of the EU has in hindsight been criticized for not having assessed the implications correctly. Still President Janukovich negotiated in good faith with the EU before he abruptly reversed course. What when wrong? — A lot.
Let me try to look at a crucial aspect of Russian policy through the example of how language has changed in comparison to good old predictable Soviet times. Talking loosely about nukes and even the use of nuclear weapons was an absolute taboo in the post-Khrushchev Soviet Union. Saying things: “We will turn you into a radiating pile of dirt”, would have meant 10 years in Magadan, as the sharp-tongued Julia Latynina, Novaja Gazeta noted. Yet vice-PM Rogozin and the venomous Dmitri Kiseljov, Rossija TV have license to talk this way. President Putin’s comments on Crimea prove it.
When it comes to nuclear weapons, words are deeds. I suppose nobody realizes this better than Israel! Nukes have not changed, nor has their usability changed or even the perception of their usability in the European theater. They remain unusable. – For obvious reasons I will limit my observations to this particular theatre of conflict. — But one thing has changed. The public as well as many pundits have lost touch with the basics of nuclear deterrence, because it was forgotten and considered outdated, a relic from the Cold War.
My reading of this major change in the Russian behavior is as follows. Moscow interpreted the United States’ decision to renounce unilaterally the Anti-Ballistic Missile Treaty (ABM) in 2003 as an attempt to gain a first-strike capability by developing a new generation of missile defense. Consequently, all attempts to find common ground on missile-defense came to naught. The American plans and the mere fact that the emerging new systems, despite denials and assurances, could technically also be used against Russian missiles was construed by Moscow as an existential threat. The other dimension of the breakdown in the relationship were the colored revolutions. Rose in Georgia in 2003 and Orange in Ukraine in 2004. The short war in Georgia in 2008 demonstrated what Moscow wanted to see. An American induced attempt to encircle Russia by enlarging NATO. Euromaidan confirmed the worst fears of Russia.
Remember Khrushchev’s famous slogan that we will catch up and overtake the United States (doganjat’ i pereganjat’). Now this never happened and he knew it himself it would not happen. Consequently, the only fields of competition left for the Soviet Union were science, high culture, sport and the arms race. The whole country was one giant oboronka, arms factory by the time it collapsed. The rest is history.
The sanctions are hurting, especially the financial sanctions.
However, the real problem of the Russian economy remains its unreformed
structure. The collapse of the oil price has considerably worsened the
situation. Now Putin is for sure no Khrushchev and still he faces
exactly the same problem, but without the constraints of ideology. May
be the classical set of Russian questions will help us to understand his
dilemma. We all know the famous saying – who is to blame and what is to
be done (kto vinovat’ i tshto delat’). But the third question, which is
crucial is often overseen– ty menja uvazhaesh’? – do you respect me?
This is the essence of the Russian-American conflict as seen and as presented by Moscow. The quintessence of the Russian propaganda remains to blame the US and present the EU as an underling. Now this might seem crude, what it is, but the feindbild of an ugly American works. As seen from the Kremlin the haughty Americans deny the respect the second nuclear superpower beckons.
Now back to the facts on the ground. The Russian economy is tanking and its reserves will not last more than a couple of years. Already now, the population feels the strain through rising prices. Putin’s grand plan of a Eurasian Union remains a blueprint without Ukraine. Still, geopolitics takes precedence over economics. This is the Russian paradox so difficult to understand. It also happens to be utterly un-Marxist.
The obvious reluctance and aversion to compromise on Ukraine, what Chancellor Merkel has patiently been striving for, can only be interpreted as the Kremlin’s attempt to destroy Ukrainian statehood by ruining its economy. That Putin will not want to end like Nicholas II or Gorbachev by losing Ukraine is obvious. Nevertheless, he has already lost the Ukrainians and a callous policy of beggar-thy-neighbor will have serious repercussion for the Russian economy, too.