The Kremlin's foreign policy priorities are determined by the changing ideology and the domestic political agenda of Russia's rulers

Russia's Woes Spell Trouble for the U.S. By Leon Aron
WSJ, Wednesday, December 31, 2008

Russia faces a particularly nasty version of the global recession (at a minimum), and perhaps an economic "perfect storm." Regardless of how bad its economy gets, two broad political trends, each carrying profound implications for Russia's foreign policy and U.S.-Russian relations, are bound to emerge.

The first will be a growing dissatisfaction with the government, which may lead to a political crisis. The second will be a reactionary retrenchment: increased internal repression and more of its already troubling foreign policy. Managing the relationship with Moscow in the face of these trends is something President-elect Barack Obama and his administration should start thinking about now.

The size and depth of Russia's economic problems -- and thus the amount of political turbulence -- will depend primarily on two variables. The first is the ruble decline. The national currency is steadily depreciating and has reached an all-time low against the euro despite the central bank's having spent $161 billion on its defense since mid-September. The ruble's losing at least 25% to 30% of its value is a given; the key political issue is whether the weakening can be managed into a gradual decline, or whether the depreciation turns into a panicky flight from the currency. (Already last September Russians dumped around 160 billion rubles to buy $6 billion -- the highest demand for dollars since the aftermath of the 1998 financial crisis.)

The second factor is oil prices. Last year, oil revenues accounted for at least one-fifth of Russia's GDP and half of state revenues. At $40 a barrel, the state budget goes into a 3%-4% deficit. In the past eight years, the national economy has mirrored fluctuating oil prices. So the 7%-8% growth projected for 2008 will have to be cut at best to 1%-2% for 2009. Zero growth or contraction are distinct possibilities.

Such a predicament is most dangerous politically for a country whose population has become used to incomes increasing 8%-10% every year since 2000. Growing disappointment is sure to follow, first among the elites and then people at large.

Despite the reduction of the poverty rate to 14% from 20% in the last five years, tens of millions of Russians continue to live precariously: A recent poll found that 37% of all families have money enough only to cover food. Unemployment and inflation (already 14%, year-on-year, in November) may well push these people over the edge and into the streets.

Perilous for any regime, such disenchantment would be especially worrisome in a country where the legitimacy of the entire political structure appears to rest on the popularity of one man, Vladimir Putin, whose astronomic ratings stemmed largely from the relative economic prosperity he has presided over. This dangerously narrow legitimacy will be sorely tried in the coming months.

Forestalling or at least containing inevitable political consequences of the economic crisis is likely to be at the root of the other political tendency: an attempt by the Putin-led elite, coalesced around Gazprom, Rosneft, state corporations and the loyal industrial "oligarchs," to pre-empt challenges by beefing up the authoritarian "vertical of power." The rewriting of the constitution to give the president 12 consecutive years in office signals the implementation of this strategy. The amendment was overwhelmingly passed by both houses of the Federal Assembly within three weeks in November, ratified by all 83 regional parliaments in less than a month. President Dmitry Medvedev signed it into law yesterday.

One scenario bruited about in Moscow has Mr. Medvedev taking full responsibility for the crisis and resigning to free the Kremlin for the caretaker prime minister (Mr. Putin), soon to be re-elected president.

A bill introduced in the Duma on Dec. 12 expands the definition of treason, punishable by up to 20 years in prison, to "taking action aimed at endangering the constitutional order, sovereignty and territorial integrity" of Russia. That same day the parliament approved the elimination of the right to jury trials for defendants charged with treason. The ruthlessness with which the riot police troops, the OMON, attacked protesters, journalists and bystanders in Vladivostok over the weekend of Dec. 20 may be a preview of things to come.

A reactionary crackdown will also mean the continuation and intensification of the already incessant and deafening propaganda portraying Russia as a "besieged fortress," surrounded by the U.S.-led enemies on the outside and undermined by the "fifth column" of the democratic political opposition within. In the words of one of the most astute independent columnists, the courageous Yulia Latyinina, the rabid anti-Americanism, which has become a linchpin of the regime's domestic political strategy, is likely to turn into a full-blown "hysteria."

The key lesson of George W. Bush's dealings with Russia is that the Kremlin's foreign policy priorities are determined by the changing ideology and the domestic political agenda of Russia's rulers to a far greater degree than by anything the U.S. does or does not do. (Which is why the U.S. exit from the antiballistic missile treaty was accepted with equanimity in 2002, while the intent to install a rudimentary antimissile system provoked Moscow's fury in 2007.) If reaction advances at home, the Kremlin will continue a truculent or outright aggressive foreign policy of resurgence and retribution, intended, among other things, to distract from and justify domestic repression. The recovery of geostrategic assets lost in the Soviet collapse will remain Moscow's overarching objective, especially in the territory of the former Soviet Union.

The Obama White House will have to navigate a difficult and narrow path in its relations with Moscow in 2009 between continuing to engage Moscow on the key issues of mutual concern (Iran, missile defense, nonproliferation, terrorism), on the one hand, and the broader strategic goal of assisting democratic stabilization in Russia.

But no matter what the Kremlin leaders and their propaganda stooges say in public, anything interpreted as approval or even a mere sign of respect by America, first and foremost by its president, is a huge boost to the government's domestic popularity and legitimacy. So the natural, almost protocol-dictated, inclination of the new administration to show good will must be balanced against firm support for the return to political and economic liberalization in Russia. Throwing diplomatic lifelines to a regime that refuses to choose such a path out of the crisis is not in America's -- and Russia's -- long-term interests.

Mr. Aron is director of Russian studies at the American Enterprise Institute and the author, most recently, of "Russia's Revolution: Essays 1989-2007" (AEI, 2007).