The Russian Economy and Russian Power

By George Friedman

U.S. Vice President Joe Biden’s visit to Georgia and Ukraine partly answered questions over how U.S.-Russian talks went during U.S. President Barack Obama’s visit to Russia in early July. That Biden’s visit took place at all reaffirms the U.S. commitment to the principle that Russia does not have the right to a sphere of influence in these countries or anywhere in the former Soviet Union.

The Americans’ willingness to confront the Russians on an issue of fundamental national interest to Russia therefore requires some explanation, as on the surface it seems a high-risk maneuver. Biden provided insights into the analytic framework of the Obama administration on Russia in a July 26 interview with The Wall Street Journal. In it, Biden said the United States “vastly” underestimates its hand. He added that “Russia has to make some very difficult, calculated decisions. They have a shrinking population base, they have a withering economy, they have a banking sector and structure that is not likely to be able to withstand the next 15 years, they’re in a situation where the world is changing before them and they’re clinging to something in the past that is not sustainable.”

U.S. Policy Continuity

The Russians have accused the United States of supporting pro-American forces in Ukraine, Georgia and other countries of the former Soviet Union under the cover of supporting democracy. They see the U.S. goal as surrounding the Soviet Union with pro-American states to put the future of the Russian Federation at risk. The summer 2008 Russian military action in Georgia was intended to deliver a message to the United States and the countries of the former Soviet Union that Russia was not prepared to tolerate such developments but was prepared to reverse them by force of arms if need be.

Following his July summit, Obama sent Biden to the two most sensitive countries in the former Soviet Union — Ukraine and Georgia — to let the Russians know that the United States was not backing off its strategy in spite of Russian military superiority in the immediate region. In the long run, the United States is much more powerful than the Russians, and Biden was correct when he explicitly noted Russia’s failing demographics as a principal factor in Moscow’s long-term decline. But to paraphrase a noted economist, we don’t live in the long run. Right now, the Russian correlation of forces along Russia’s frontiers clearly favors the Russians, and the major U.S. deployments in Iraq and Afghanistan would prevent the Americans from intervening should the Russians choose to challenge pro-American governments in the former Soviet Union directly.

Even so, Biden’s visit and interview show the Obama administration is maintaining the U.S. stance on Russia that has been in place since the Reagan years. Reagan saw the economy as Russia’s basic weakness. He felt that the greater the pressure on the Russian economy, the more forthcoming the Russians would be on geopolitical matters. The more concessions they made on geopolitical matters, the weaker their hold on Eastern Europe. And if Reagan’s demand that Russia “Tear down this wall, Mr. Gorbachev” was met, the Soviets would collapse. Ever since the Reagan administration, the idee fixe of not only the United States, but also NATO, China and Japan has been that the weakness of the Russian economy made it impossible for the Russians to play a significant regional role, let alone a global one. Therefore, regardless of Russian wishes, the West was free to forge whatever relations it wanted among Russian allies like Serbia and within the former Soviet Union. And certainly during the 1990s, Russia was paralyzed.

Biden, however, is saying that whatever the current temporary regional advantage the Russians might have, in the end, their economy is crippled and Russia is not a country to be taken seriously. He went on publicly to point out that this should not be pointed out publicly, as there is no value in embarrassing Russia. The Russians certainly now understand what it means to hit the reset button Obama had referred to: The reset is back to the 1980s and 1990s.

Reset to the 1980s and 90s

To calculate the Russian response, it is important to consider how someone like Russian Prime Minister Vladimir Putin views the events of the 1980s and 1990s. After all, Putin was a KGB officer under Yuri Andropov, the former head of the KGB and later Chairman of the Communist Party for a short time — and the architect of glasnost and perestroika.

It was the KGB that realized first that the Soviet Union was failing, which made sense because only the KGB had a comprehensive sense of the state of the Soviet Union. Andropov’s strategy was to shift from technology transfer through espionage — apparently Putin’s mission as a junior intelligence officer in Dresden in the former East Germany — to a more formal process of technology transfer. To induce the West to transfer technology and to invest in the Soviet Union, Moscow had to make substantial concessions in the area in which the West cared the most: geopolitics. To get what it needed, the Soviets had to dial back on the Cold War.

Glasnost, or openness, had as its price reducing the threat to the West. But the greater part of the puzzle was perestroika, or the restructuring of the Soviet economy. This was where the greatest risk came, since the entire social and political structure of the Soviet Union was built around a command economy. But that economy was no longer functioning, and without perestroika, all of the investment and technology transfer would be meaningless. The Soviet Union could not metabolize it.

Former Soviet leader Mikhail Gorbachev was a communist, as we seem to forget, and a follower of Andropov. He was not a liberalizer because he saw liberalization as a virtue; rather, he saw it as a means to an end. And that end was saving the Communist Party, and with it the Soviet state. Gorbachev also understood that the twin challenge of concessions to the West geopolitically and a top-down revolution in Russia economically — simultaneously—risked massive destabilization. This is what Reagan was counting on, and what Gorbachev was trying to prevent. Gorbachev lost Andropov’s gamble. The Soviet Union collapsed, and with it the Communist Party.

What followed was a decade of economic horror, at least as most Russians viewed it. From the West’s point of view, collapse looked like liberalization. From the Russian point of view, Russia went from a superpower that was poor to an even poorer geopolitical cripple. For the Russians, the experiment was a double failure. Not only did the Russian Empire retreat to the borders of the 18th century, but the economy became even more dysfunctional, except for a handful of oligarchs and some of their Western associates who stole whatever wasn’t nailed down.

The Russians, and particularly Putin, took away a different lesson than the West did. The West assumed that economic dysfunction caused the Soviet Union to fail. Putin and his colleagues took away the idea that it was the attempt to repair economic dysfunction through wholesale reforms that caused Russia to fail. From Putin’s point of view, economic well-being and national power do not necessarily work in tandem where Russia is concerned.

Russian Power, With or Without Prosperity

Russia has been an economic wreck for most of its history, both under the czars and under the Soviets. The geography of Russia has a range of weaknesses, as we have explored. Russia’s geography, daunting infrastructural challenges and demographic structure all conspire against it. But the strategic power of Russia was never synchronized to its economic well-being. Certainly, following World War II the Russian economy was shattered and never quite came back together. Yet Russian global power was still enormous. A look at the crushing poverty — but undeniable power — of Russia during broad swaths of time from 1600 until Andropov arrived on the scene certainly gives credence to Putin’s view.

The problems of the 1980s had as much to do with the weakening and corruption of the Communist Party under former Soviet leader Leonid Brezhnev as it had to do with intrinsic economic weakness. To put it differently, the Soviet Union was an economic wreck under Joseph Stalin as well. The Germans made a massive mistake in confusing Soviet economic weakness with military weakness. During the Cold War, the United States did not make that mistake. It understood that Soviet economic weakness did not track with Russian strategic power. Moscow might not be able to house its people, but its military power was not to be dismissed.

What made an economic cripple into a military giant was political power. Both the czar and the Communist Party maintained a ruthless degree of control over society. That meant Moscow could divert resources from consumption to the military and suppress resistance. In a state run by terror, dissatisfaction with the state of the economy does not translate into either policy shifts or military weakness — and certainly not in the short term. Huge percentages of gross domestic product can be devoted to military purposes, even if used inefficiently there. Repression and terror smooth over public opinion.

The czar used repression widely, and it was not until the army itself rebelled in World War I that the regime collapsed. Under Stalin, even at the worst moments of World War II, the army did not rebel. In both regimes, economic dysfunction was accepted as the inevitable price of strategic power. And dissent — even the hint of dissent — was dealt with by the only truly efficient state enterprise: the security apparatus, whether called the Okhraina, Cheka, NKVD, MGB or KGB.

From the point of view of Putin, who has called the Soviet collapse the greatest tragedy of our time, the problem was not economic dysfunction. Rather, it was the attempt to completely overhaul the Soviet Union’s foreign and domestic policies simultaneously that led to the collapse of the Soviet Union. And that collapse did not lead to an economic renaissance.

Biden might not have meant to gloat, but he drove home the point that Putin believes. For Putin, the West, and particularly the United States, engineered the fall of the Soviet Union by policies crafted by the Reagan administration — and that same policy remains in place under the Obama administration.

It is not clear that Putin and Russian President Dmitri Medvedev disagree with Biden’s analysis — the Russian economy truly is “withering” — except in one sense. Given the policies Putin has pursued, the Russian prime minister must believe he has a way to cope with that. In the short run, Putin might well have such a coping mechanism, and this is the temporary window of opportunity Biden alluded to. But in the long run, the solution is not improving the economy — that would be difficult, if not outright impossible, for a country as large and lightly populated as Russia. Rather, the solution is accepting that Russia’s economic weakness is endemic and creating a regime that allows Russia to be a great power in spite of that.

Such a regime is the one that can create military power in the face of broad poverty, something we will call the “Chekist state.” This state uses its security apparatus, now known as the FSB, to control the public through repression, freeing the state to allocate resources to the military as needed. In other words, this is Putin coming full circle to his KGB roots, but without the teachings of an Andropov or Gorbachev to confuse the issue. This is not an ideological stance; it applies to the Romanovs and to the Bolsheviks. It is an operational principle embedded in Russian geopolitics and history.

Counting on Russian strategic power to track Russian economic power is risky. Certainly, it did in the 1980s and 1990s, but Putin has worked to decouple the two. On the surface, it might seem a futile gesture, but in Russian history, this decoupling is the norm. Obama seems to understand this to the extent that he has tried to play off Medvedev (who appears less traditional) from Putin (who appears to be the more traditional), but we do not think this is a viable strategy — this is not a matter of Russian political personalities but of Russian geopolitical necessity.

Biden seems to be saying that the Reagan strategy can play itself out permanently. Our view is that it plays itself out only so long as the Russian regime doesn’t reassert itself with the full power of the security apparatus and doesn’t decouple economic and military growth. Biden’s strategy works so long as this doesn’t happen. But in Russian history, this decoupling is the norm and the past 20 years is the exception.

A strategy that assumes the Russians will once again decouple economic and military power requires a different response than ongoing, subcritical pressure. It requires that the window of opportunity the United States has handed Russia by its wars in the Islamic world be closed, and that the pressure on Russia be dramatically increased before the Russians move toward full repression and rapid rearmament.

Ironically, in the very long run of the next couple of generations, it probably doesn’t matter whether the West heads off Russia at the pass because of another factor Biden mentioned: Russia’s shrinking demographics. Russian demography has been steadily worsening since World War I, particularly because birth rates have fallen. This slow-motion degradation turned into collapse during the 1990s. Russia’s birth rates are now well below starkly higher death rates; Russia already has more citizens in their 50s than in their teens. Russia can be a major power without a solid economy, but no one can be a major power without people. But even with demographics as poor as Russia’s, demographics do not change a country overnight. This is Russia’s moment, and the generation or so it will take demography to grind Russia down can be made very painful for the Americans.

Biden has stated the American strategy: squeeze the Russians and let nature take its course. We suspect the Russians will squeeze back hard before they move off the stage of history.

The Role of the Mexican Military in the Cartel War

U.S. drug czar Gil Kerlikowske is in the middle of a four-day visit this week to Mexico, where he is meeting with Mexican government officials to discuss the two countries’ joint approach to Mexico’s ongoing cartel war. In prepared remarks at a July 27 press conference with Mexican Attorney General Eduardo Medina Mora, Kerlikowske said Washington is focused on reducing drug use in the United States, supporting domestic law enforcement efforts against drug traffickers and working with other countries that serve as production areas or transshipment points for U.S.-bound drugs.

Absent from his remarks was any mention of the U.S. position on the role of the Mexican military in the country’s battle against the drug cartels. Kerlikowske’s visit comes amid a growing debate in Mexico over the role that the country’s armed forces should play in the cartel war. The debate has intensified in recent weeks, as human rights organizations in Mexico and the United States have expressed concern over civil rights abuses by Mexican troops assigned to counternarcotics missions in various parts of the country.

The director of Mexico’s independent National Human Rights Commission, for example, has encouraged the new legislature to re-examine the role of the Mexican military in the country’s cartel war, saying that the current approach is clearly not working. The number of citizen complaints against soldiers has increased over the last few years as the troops have become actively engaged in counternarcotics operations, and the commission director has expressed hope for greater accountability on the part of the armed forces.

Citing similar concerns, and the fact that such citizen complaints are handled by the military justice system — which has reportedly not successfully prosecuted a case in years — the independent U.S.-based Human Rights Watch has sent a letter to U.S. Secretary of State Hillary Clinton urging her not to certify Mexico’s human rights record to Congress, which would freeze the disbursement of a portion of the funds for the Merida Initiative, a U.S. counternarcotics aid package for Mexico.

More important than any possible funding freeze from Washington, though, is the potential response from the Mexican government. President Felipe Calderon has emphasized that the use of the military is a temporary move and is necessary until the country’s federal police reforms can be completed in 2012. Legislative leaders from both main opposition parties complained last week that Calderon’s approach has unnecessarily weakened the armed forces, while the leader of the Mexican senate — a member of Calderon’s National Action Party — said the legislature will examine the role of the military and seek to balance the needs of the cartel war with the civil rights of the Mexican people. In addition, the president of Mexico’s supreme court has said the court plans to review the appropriateness of military jurisdiction in cases involving citizen complaints against soldiers.

Domestic debate and international criticism of Calderon’s use of the military are not necessarily new. Indeed, Calderon was defending his approach to representatives of the United Nations back in early 2008. However, the renewed debate, combined with recent changes in the Mexican legislature, have set the stage for a general re-examination of the Mexican military’s role in the cartel war. And while it is still unclear exactly where the re-examination will end up, the eventual outcome could drastically change the way the Mexican government fights the cartels.

More than Just Law Enforcement

Since taking office in December 2006, Calderon’s decision to deploy more than 35,000 federal troops in security operations around the country has grabbed headlines. While previous presidents have used the armed forces for counternarcotics operations in isolated cases, the scope and scale of the military’s involvement under Calderon has reached new heights. This approach is due in no small part to the staggering level of corruption among federal police. But primarily, the use of the military is a reflection of the many tasks that must be performed under Calderon’s strategy, which is far more complex than simply putting boots on the ground and requires more than what traditional law enforcement agencies can provide.

This broad range of tasks can be grouped into three categories:

• The first involves duties traditionally carried out by the armed forces in Mexico, such as technical intelligence collection and maritime and aerial monitoring and interdiction. These tasks are well-suited to the armed forces, which have the equipment, training and experience to perform them. These are also key requirements in the country’s counternarcotics strategy, considering that Mexico is the primary transshipment point for South American-produced cocaine bound for the United States, the world’s largest market for the drug.
• The second category includes traditional civilian law enforcement and judicial duties. Specifically, this includes actions such as making arrests, prosecuting and convicting defendants and imposing punishment. With the exception of the military routinely detaining suspects and then turning them over to law enforcement authorities, the tasks in this second category have remained mainly in the hands of civilian authorities.
• The final category is more of a gray area. It involves tasks that overlap between Mexico’s armed forces and law enforcement agencies, and it is the area over the last few years in which the Mexican military has become increasingly involved. It is also the area that has caused the most controversy, primarily due to the fact that it has brought the troops into closer contact with the civilian population.

Some of the most noteworthy tasks in this final “gray” category include:

• Drug-crop eradication and meth-lab seizures. In addition to being the main transit point for U.S.-bound cocaine, Mexico is also estimated to be the largest producer of marijuana and methamphetamines consumed in the United States. The U.S. National Drug Intelligence Center estimates that more than 17,000 tons of marijuana were produced in Mexico during 2007, most of which was smuggled into the United States. Similarly, seizures of so-called meth superlabs in Mexico over the last few years — some capable of producing hundreds of tons annually — underscore the scale of meth production in Mexico. The destruction of marijuana crops and meth production facilities is a task that has been shared by both the military and law enforcement under Calderon.
• Immigration and customs inspections at points of entry and exit. Thorough inspections of inbound and outbound cargo and people at Mexico’s borders have played a key role in some of the more noteworthy drug seizures during the last few years, including the country’s largest cocaine seizure at the Pacific port of Manzanillo in November 2007. Similar inspections elsewhere have led to significant seizures of weapons and precursor chemicals used in the production of meth. In many cases, the Mexican armed forces have played a role in either stopping or inspecting suspect cargo.
• Raids and arrests of high-value cartel targets. Beyond simply stopping the flow of drugs and weapons into and out of Mexico, the federal government has also sought to disrupt the powerful organizations that control the drug trade by arresting drug cartel members. Given the federal police’s reputation for corruption, highly sensitive and risky operations such as the arrest of high-ranking cartel leaders have more often than not been carried out by the military’s elite Special Forces Airmobile Group (GAFE). In most cases, the suspects detained by GAFE units have been quickly handed over to the attorney general’s office, though in some cases military personnel have been accused of holding suspects for longer than necessary in order to extract information themselves.
• General public safety and law enforcement. The rise in organized crime-related violence across Mexico over the last few years has been a cause for great concern both within the government and among the population. A central part of the federal government’s effort to curb the violence has been the deployment of military forces to many areas, where the troops conduct such actions as security patrols, traffic stops and raids as well as man highway checkpoints. In some cities, the military has been called upon to assume all public-safety and law-enforcement responsibilities, disarming the local police force while looking for police links to organized crime. Another part of this militarization of law enforcement has involved the appointment of military officers — many of whom resign their commission a day before their appointment — to law enforcement posts such as police chief or public safety consultant.

It is this final trend that has led to most of the concerns and complaints regarding the military’s role in the cartel war. The federal government has been mindful of these concerns from the beginning and has tried to minimize the criticism by involving the federal police as much as possible. But it has been the armed forces that have provided the bulk of the manpower and coordination that federal police agencies — hampered by rampant corruption and a tumultuous reform process — have not been able to muster.

A Victim of its Own Success

The armed forces’ greater effectiveness, rapid deployment capability and early successes in some public security tasks made it inevitable that its role would evolve and expand. The result has been a classic case of mission creep. By the time additional duties were being assigned to the military, its resources had become stretched too thin to be as effective as before. This reality became apparent by early 2008 in public-safety roles, especially when the military was tasked with security operations in cities as large and as violent as Ciudad Juarez.

Even though the Mexican military was not designed or trained for law-enforcement duties or securing urban areas, it had been generally successful in improving the security situation of the smaller cities to which it had been deployed throughout 2007. But by early 2008, when soldiers were first deployed to Ciudad Juarez en masse, it became clear that they simply had too much on their plate. As the city’s security environment deteriorated disastrously during the second half of 2008, the military presence there proved incapable of controlling it, an outcome that has continued even today, despite the unprecedented concentration of forces that are currently in the city.

In addition to the military’s mission failures, it has also struggled with increasing civil rights complaints from citizens. In particular, soldiers have been accused of unauthorized searches and seizures, rough treatment and torture of suspects (which in some cases have included police officers), and improper rules of engagement, which have led several times to civilian deaths when soldiers mistook them for hostile shooters. In many cities, particularly in northern and western Mexico, exasperated residents have staged rallies and marches to protest the military presence in their towns.

While the military has certainly not acted flawlessly in its operations and undoubtedly bears guilt for some offenses, these complaints are not completely reliable records of the military’s performance. For one thing, many cartel enforcers routinely dress in military-style clothing and travel in vehicles painted to resemble military trucks, while many also have military backgrounds and operate using the tactics they were taught. This makes it difficult for residents, during the chaos of a raid, to distinguish between legitimate soldiers and cartel members. More important, however, is the fact that the Mexican drug cartels have been keenly aware of the threat posed to them by the military and of the controversy associated with the military’s involvement in the cartel war. For this reason, the cartels have been eager to exploit this vulnerability by paying residents to protest the military presence and spread reports of military abuses.

Outlook

As the Mexican congress and supreme court continue the debate over the appropriateness of the military in various roles in the cartel war, it is important to recall what the armed forces have done well. For all its faults and failures, the military remains the most reliable security tool available to the Mexican government. And continued problems with the federal police reforms mean that the military will remain the most reliable and versatile option for the foreseeable future.

Any legislative or judicial effort to withdraw the armed forces from certain tasks will leave the government with fewer options in battling the cartels and, ultimately, in an even more precarious position than it is in now. The loss of such a valuable tool in some areas of the cartel war would force the government to fundamentally alter its strategy in the cartel war, most likely requiring it to scale back its objectives.