How a Great Power Falls Apart
Decline Is Invisible From the Inside
With last Saturday's announcement, we now know with virtual certainty that Vladimir Putin will be returning to the Kremlin in May as the next president of Russia. His groomed and subordinate sidekick, Dmitri Medvedev, will trade his position and become the next prime minister. The "tandem," as the arrangement was originally dubbed in 2008, will endure for the foreseeable future, perhaps even for more than a decade to come.
While this leadership change portends little for Russia -- indeed, once again de jure power will be reunited with de facto power -- one key area remains a question mark: relations with Washington. Remember back to Putin's second presidential term, from 2004 to 2008. His criticisms of the United States sharpened. He obstructed a number of U.S. foreign policy initiatives such as NATO enlargement and missile defense in Europe. And then things hit rock bottom in the fall of 2008 after the Russian invasion of Georgia, just after Medvedev became president.
Yet, virtually as soon as the Obama administration came to power the following January, relations between Washington and Moscow made an abrupt about-face. The Obama administration had several key incentives to "reset." First, Washington wanted Russian support in trying to curtail Iran's nuclear weapons program. Second, increasing the United States' military presence in Afghanistan would be ever more difficult without a friendly nod from the Kremlin. And third, Obama had made nuclear arms control a signature item on his foreign policy agenda. Moscow would have to be on board.
In the face of considerable skepticism in both capitals, Obama and Medvedev resuscitated the bilateral relationship. They worked together in the United Nations to pass the toughest sanctions ever on Iran. They reached agreement with Russia and other regional states to establish new transit corridors to supply troops in Afghanistan. And sitting together in Prague in April of 2010, they signed the so-called New START treaty, the most significant nuclear arms reduction agreement the world has seen in two decades.
But now Putin is returning to the presidency. Some are suggesting the strongman will play tough, scrapping the considerable progress that Medvedev has made. Yet, unlike the two previous Washington-Moscow honeymoons -- the first in 1992, after the collapse of the Soviet Union, and in 2002, immediately following 9/11, both of which quickly ended in mutual disappointment -- the current warming trend will be more sustainable. To put it most simply: With a rising China, falling oil prices, and a need for partnerships abroad, Putin can no longer go it alone.
Long before the financial crisis, a mainstream view prevailed in Russia that the United States was in economic decline. The wars in Iraq and Afghanistan were sapping U.S. power. Putin often made it a point of underscoring such arguments, while at the same time pleading his case that Russia was ascending alongside the other fast-growing BRIC countries. A truly new multipolar world was emerging. Or so the thinking went.
The dramatic impact of the global financial crisis not only took a toll on the United States, however. It struck a blow to Russia as well, proving exactly how vulnerable the Russian economic growth miracle of the previous decade had been. Of all the members of the G-20, the Russian economy was the hardest hit. The change in GDP from growth to shrinkage amounted to 15 percent in just one year. The sobering event led to renewed interest on the part of the Medvedev administration and much of Russia's political-economic elites to integrate more deeply with the West to insure Russia's modernization.
As China came out a relative winner, Russian elites began to acknowledge openly that the changing global balance of economic and political power may not, as some had argued, be shifting to their favor. After years of obsessing about the dangers of U.S. power and unilateralism, Moscow seems to have a new bogeyman. The Kremlin is now increasingly concerned about the rapid rise of China and its growing influence in Siberia, the Far East, Central Asia, and the Caspian -- what Medvedev coined three years ago as Russia's "zone of privileged interests."
So Putin returns to the presidency to find a changed world. Back in the early 2000s, he displayed natural political instincts in positioning himself as a leader promising to bring stability, predictability, and greater prosperity to the Russian people. Indeed, they responded. But now the domestic policy challenges are different. Stability, predictability, and greater prosperity are taken for granted. Russians are far wealthier today, with a per capita GDP of close to $20,000 (it was just about $2,000 in 1999). Instead, demands for better social services, better governance, and less corruption are growing. There is a natural tendency, as modernization theory argues, that as a nation's per capita GDP grows beyond a level of $10,000, citizens demand greater government openness and accountability. Increasingly, at least at the elite level, Russians want more pluralistic, if not democratic, governance. This has been anything but Putin's priority in the past; he may have to reconsider his stance now.
Putin will also face a potentially disastrous fiscal situation. This danger may well be at the heart of why the long-serving and very successful minister of finance, Alexis Kudrin, is now unemployed. Through a series of populist measures over the past few years, the Russian federal budget has ballooned to the point that, to ensure adequate revenue to fund government programs, Moscow needs oil to cost nearly $125 a barrel. Today's price is about $80, and the world economy is dangerously close to another long recession that could drive the price considerably lower for a lengthy period. National expenditures are going to have to be reigned in. Kudrin, a liberal reformer from St. Petersburg, has always been a stalwart supporter of fiscal restraint. Putin may have been able to drive him out, but he will not be able to strong-arm the balance sheet as economic realities get even tougher.
So both the shifting balance of power in the world, as well as the current domestic challenges, would seem to push Russia in the direction of more amenable and accommodating policies toward the United States and the West. During Putin's first two terms, he was the beneficiary of growing oil production, then rising oil prices, and soft monetary policies that kept world markets afloat in cash. Putin could afford to act tough, aggresively exploit energy assets, crack down on uppity businessmen, and squash democracy advocates with virtual impunity.
But as former Finance Minister Alexei Kudrin said in an April 2009 speech in Washington, those felicitous circumstances that powered the Russian recovery before the financial crisis are not likely to reoccur in the near future, if ever. The Russian economy will have to rely on new engines of growth, which will require the Kremlin to return to a structural economic reform agenda and make extra efforts to improve Russia's investment climate. Back in 2006, a title such as "Vladimir the Lucky" was apt enough, considering the favorable external climate Putin enjoyed as Russia's president. Come 2012, however, he will need a lot more than luck to grow Russia's power and influence.