START, pipelines, and economic growth
It’s been a pretty Russia-intensive news day, between the apparent agreement on a new START treaty, rumblings that Ukraine is going to sell its pipeline network, and surprisingly robust growth predictions by the World Bank. It might be somewhat outlandish, but I actually think I’ve listed the above items in order of increasing importance. Let me explain.
Despite the media chorus, I actually think that the new START treaty really isn’t going to be that important in the grand scheme of things: the Russians don’t want to spend the large amounts of money necessary to maintain a gigantic nuclear arsenal (despite some talk to the contrary they are perfectly capable of doing this, but would prefer not to), the Obama administration has fixated on disarmament as a political priority and, therefore, some sort of deal was all but assured. However as previous US-Soviet experience abundantly demonstrates, arms control agreements are rather flimsy ground for a lasting partnership. Any expectations that the “goodwill” from the recent negotiations (if indeed there was any to begin with, given how long the negotiations dragged out, and judging by some comments leaked to the media, it sounds like the atmosphere at START was about as cordial as Charlie Sheen and Denise Richard’s child custody hearing) will spill over into the broader Russia-America relationship will, I expect, be dashed in short order. START will do very little, and perhaps nothing at all, to address Russia’s worries about the planned ABM system in Romania, nor will it magically resolve continued NATO-Russian tensions over Georgia. I have no problem with what came out of START, surely reducing the number of nuclear weapons is a no-brainer, but I’d advise everyone to dial down their enthusiasm just a bit: this is a much more limited and specific deal than most people believe and the likelihood that it will spill over into the broader relationship seems rather slim.
As for the story about Ukraine possibly selling control of it’s pipelines, this is, potentially at least, a huge deal. If this moves forward at all I’d expect it to move forward very slowly, but a Gazprom/Russia that formally controls Ukraine’s pipelines is a Gazprom/Russia that has Europe even more firmly by the balls. For the practical quotidian effect it would have on the world, this deal would be much more important than the START treaty (thankfully the the likelihood of nuclear weapons actually being used in a US-Russia conflict was, and will remain, quite slim). However, if such a pipeline sale ever goes forward I expect that it will only be on terms that are financially advantageous to Russia: Putin and Sechin surely remember the 90’s when massive gas subsidies to Kuchma gained nothing of lasting value, and with all of the pressure on the state budget they are not going to be in particularly generous moods. The Kremlin’s behavior during the Ukrainian presidential election was quite restrained, probably because of a general awareness among the Russians that the Ukrainians are between a rock and a hard place (everyone in Russia remembers that owing money to the IMF is only slightly more pleasant than owing it to a mob boss). This story should obviously be closely monitored, and it, like so many grand designs in Eastern Europe, might amount to nothing, but it could be a major development in Russia’s efforts to become an “energy superpower.”
As for the last story, I think it’s the most important of all. As I have repeatedly made clear, I think that the recent protests against Putin have been extremely overblown: they have been much more geographically dispersed, much smaller in size, and much more diverse in their demands than the Western media has indicated. I think it is certainly possible that a broad based anti-Putin movement could emerge were Russia to enter a prolonged period of economic stagnation, or decline, but if economic growth resumes, and particularly if real wages continue to increase, I expect that any significant pressure on the Kremlin will rapidly dissipate. Well, according to the World Bank the Russian economy is going to grow by over 5% this year. Yes, this is primarily Russia making up ground it lost during the savage downturn of 2009, but, due to massive increases in social expenditure, the population at large was largely shielded from the negative effects of that downturn, and a quick resumption of growth would do a lot to both increase living standards and ease pressure on the state budget (which ran a very large deficit in 2009).
Ultimately Russia’s place on the world stage is going to be determined by the performance of its economy, and this is something that, as best I can tell, the Kremlin leadership fully recognises. Is the Putin economic model (to the extent that Putin’s autocratic capitalism is different than that which is practiced in any number of countries in the world) a perfect, or even particularly attractive one? No, as I’ve said before it seems too state-centered, corrupt, and inefficient for my tastes. But my tastes aren’t particularly important, and this is especially true if Russia is able to return to 4-5% annual growth. If it is able to achieve that sort of performance, and it hardly seems outrageous to suggest that it can, I fully expect all of the mumblings about incipient revolution and comprehensive political upheaval to die down.
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A few comments…
Re-economy. The budget deficit for 2009 was 7% of GDP, which although high by previous standards isn’t amazingly so (the US is at 10%, the UK at 13%) – especially since they were preceded by years of surpluses. Also, the 5-5.5% WB forecast isn’t new – “bne’s annual survey of investment bank outlooks suggests that growth will return to at least 4% and possibly go as high as 6% by the end of 2010.” (http://businessneweurope.eu/story1919/RUSSIA_2010_Slow_build_over_first_half_to_boom_in_2011)
Re-nukes. Totally disagree with “the likelihood of nuclear weapons actually being used in a US-Russia conflict was, and will remain, quite slim”. Russia’s military doctrine allows for the battle use of nuclear weapons and military exercises have typically featured a slow retreat while using tactical nukes to check NATO’s advance. Considering that the US will almost certainly win any conventional confrontation with Russia, using tactical nukes is in fact the logical and correct choice.
What reduces the impact of the deficit even further is the huge surplus Russia has run for a decade. Russian government debt is trivial.
In response to another comment. See in context »Don’t underestimate the importance of the new START agreement. US-Russian strategic nuclear relations happen on a plane that’s pretty firmly detached from just about any other dimension of the relationship.
The verification mechanisms that the Bush administration foolishly wanted to abandon give us greater insights into what Russia is doing with their arsenal, and vice versa on our side – it’s active monitoring that facilitates as much transparency as is possible between two sides that can be ready to destroy each other, and the world, at the drop of a hat. That allows each side to plan accordingly, and not overestimate the others’ capabilities or misunderstand intentions.
In fact, it’s precisely because of the lack of good will in other parts of the relationship that START is important – it keeps us engaged with one another on nuclear issues so that when there is a crisis in the relationship, it doesn’t rapidly ratchet us up to Def-Con 3. There’s plenty to get enthusiastic about when you evaluate it on this level.
Anatoly,
I should have phrased what I said more precisely. What I meant to say was that the existence of nuclear weapons renders the likelihood of a US-Russia war extremely remote. If such a war actually broke out, you are right that it would rapidly escalate to include the use of nukes.
Michael,
You’re right that START has some very valuable components, and I certainly don’t want to come accross like an old man screaming “Get off my lawn!” at every passer by. I just think that there are a lot of really naive expectations that this new arms control deal will lead to Russian cooperation on all sorts of unrelated issues (Iran, Afghanistan, etc.).
In response to another comment. See in context »[...] Oригинaл публикaции START, pipelines, and economic growth : [...]
Good article Mark. Thanks.
I would go even further than you in arguing that the crisis won’t demonstrably affect United Russia’s grip on power. While one can point to countless historic episodes where economic hardship led to political instability or outright rebellion, it’s also true that many Russians are now leading lives with levels of consumption that, even if they remain stagnant for several years, will leave them content with their personal lives. That was definitely not true in the 1990’s.
It definitely seems to be the case that any fundamental change in the Russian leadership in the short and medium term would have to come from the top down, not the bottom up. That is, the siloviki wars could escalate, Putin could pull a George Washington and leave the political scene and go into retirement, Medvedev’s new party could steal a large chunk of United Russia’s base, etc. These kinds of scenarios are plausible, but most seem unlikely. If I were a betting man I would put my money on the status quo.