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Much is being made of the financial crisis hitting Russia. To be sure, Russia is unquestionably adrift in their own fiscal and monetary predicament. In fact, if reports are correct, the Russian fiscal crisis appears to be bigger than the U.S. However, from a foreign policy perspective it is important for the U.S. to not assume these issues are some form of opportunity to gain leverage over a country that has been increasingly bellicose during the Putin era. In fact, Geopolitical Thoughts believes not only that it would be a mistake to extrapolate the pressure the crisis is putting on leadership as validation of a weakened Russia; but also, the U.S. might need to do whatever necessary ensure the Putin-Medvedev leadership structure remains in power.
Geopolitical Thoughts readily admits that Russia and its leadership are not the best bedmates for the U.S. to seek. In fact, as more and more details slip through Russia’s own form of censorship, it is clear that Vladimir Putin is not an ordinary head of state. As has recently been seen with the terrifying stories related to the slain former body guard for the Chechnyan President, Akhmad Kadyrov (amongst countless other citations: 1, 2, 3), Putin appears fairly involved with violent retaliation against anyone that crosses him or his proxies. Considering these accusations, it begs the question to ask why support the leadership of an individual who appears more and more authoritarian than democratic? The answer is two-fold. The first comes in the form of a classic idiom, “Better the devil you know than the devil you don’t”. The second comes from a famous quote by Sun Tzu, “Keep you friends close and your enemies closer.”
Supporting the removal of Putin and his gang by stating “The devil you know…” might seem clichéd. However, like Saddam Hussein and the form of secular dictatorship he demonstrated, the U.S. must consider the devil that is known versus the devil that is unknown. This was a classic mistake made by the Cheney-Wolfowitz NeoCon-led efforts in 2003. While it is hard to predict if a collapse of leadership in Russia would create a genocidal, civil war like that which was witnessed in Iraq, it is still imprudent to believe the resulting power void would spawn an improved form of governance. In fact, it is curious to see the lost irony of recent articles highlighting demonstrations in Russia against the current leadership. Instead of groups promoting democratic reform, many of the protests are actually to push Russia back to Soviet Union-era communism. It is with that backdrop that Geopolitical Thoughts considers it hasty to assume a failed-state Russia or a political-coup of current leadership would result in an improved situation for U.S. interests or regional stability.
As for Sun Tzu’s theories from his timeless “The Art of War”, there are two reasons to apply his famous rule regarding friends, enemies, and proximities. The first reason is because Geopolitical Thoughts does not equate the Russian fiscal crisis as being the same as the long-term implications of crisis’s for most EU nations. Secondly, it is in these times of perceived need that long-term relationships are best forged, and not when two countries jockey from positions of strength.
It is true, the Russian economy might very well be in a downward spiral. Over the past week, more particulars surfaced about Russian banks seeking restructuring of over $400 billion of foreign debt. These reports have led some to believe that not only is the Russian financial industry becoming completely insolvent; but also, that Russia’s entire future might hang in the balance as its ruble caves in. However, there are quite a few reasons why Geopolitical Thoughts does not believe Russia’s long-term prospects are nearly as bleak as some are predicting. First and foremost, more so than any other G-8 nation, Russia’s strength is based upon crude oil. And Russia is not taking a backseat to the issue. As T. Boone Pickens pointed out in the fall, while Russia usually sends a singular individual as its envoy to OPEC meetings, they sent 22 to a fall meeting. To further Mr. Pickens’ point, it is safe to assume Russia will be lock-step with Saudi Arabia going forward to influence OPEC outcomes. Putin might be viewed as ruthless, but he is not stupid. While no one in the public markets predicted a crude oil price collapse from high $140 per barrel in June 2008 to it’s current sub-$40 prices. Yet the supply-demand dynamics favor a long-term over-$60 per barrel pricing (even with the worst economic backdrop in modern times, 12-month forward crude is pricing above $50 per barrel and January ’11 crude is above $60 per barrel.) In fact, many – Boone Pickens included – foresee a very real scenario unfolding that pushes crude back above $100 per barrel in the not-so-distant future. With any snap-back in commodity pricing, a vast majority of Russia’s ills disappears. Furthermore, Russia’s fiscal position is not nearly as debilitating as other nations have seen. It is a country with cash reserves of over $400 billion and government debt of under $200 billion. Even with a weak currency, Russia remains relatively strong, both regionally and globally.
For the time being Russia is facing real and serious economic risks. And while Geopolitical Thoughts feels they are more than likely to return to economic strength faster than most other nations, this near-term weakness is precisely the time the United States should move forward with an open hand. Fortunately, over this weekend the first diplomatic overtures were thrust forward as Russia and the U.S. are negotiating bi-lateral efforts against the Taliban. However, the goal of U.S. foreign policy goals towards Russia should not be a quid-pro-quo effort. Instead, the U.S. should become a champion for Russia. While it is unlikely Russia will ever be an ally to the U.S., they might present a counter-balance in the region, should the U.S. need one down the road.
In summary, while Geopolitical Thoughts does not support the idea of a return to a bi-polar world reminiscent of the Soviet era, a regionally-strong Russia with better U.S. relations is a foreign policy goal that is worth the effort. It is Geopolitical Thoughts belief that Russia’s current economic woes are likely to correct themselves with any rebound in the commodity price of crude oil. In the meantime, the U.S. should take advantage of a relatively-weakened nation with support for relieving private Russian bank obligations internationally to build longer-term relations with this past rival. By making overt diplomatic attempts to show respect to this sleeping bear through this and other means, the U.S. is creating a possible chip for future poker games. In other words, to mollify the Cliché Gods one final time, when it comes to Russia, “Can’t live with ‘em; can’t live without ‘em.”
