May 6, 2015

The Ukrainian Issue — What Price to Totalitarian Russia?

We deliberately waited for the Russian President's thirteenth “phone-in with the Russian people”: not so much expecting to hear something truthful, as to once again make sure that our previous estimates and forecasts regarding Vladimir Putin's true goals and the real situation in Russia itself were correct. When the wait was over we learnt yet again: all troubles in Russia are due to the West's cunning, to which the policy of strategic deterrence of the Russian Federation is the most important task, and Ukraine and the related sanctions are just tools to achieve this strategic goal.

...All the Troubles in Russia “Due to the West’s Cunning”…

For the umpteenth time everything is upside down: not the corrupted and inefficient power undermined the Russian economy and welfare of its citizens, it was not the Kremlin who initiated and carried out the annexation of the Crimea and has been throwing Russian soldiers into the fratricidal war in the Donbas for further absorption of the territory of Ukraine, those were treacherous Washington, Brussels and “Nazis in Kyiv” seeking to undermine the so dear to every Russian “autocratic-orthodox harmony and the world order,” which are impossible without control over Russia's neighbors.

Let us analyze whether Putin's “siloviki” (special services) have internal capacity and external support for implementation of one of the proposed by them scenarios of “resolving the Ukrainian issue” — acceleration of the flywheel of the war in the East of Ukraine (including the “Duma's” initiatives on “recognizing the independence of the DPR/LPR” and “permission for the use of the armed forces of the Russian Federation”), bringing of Russian “peacekeepers” or “freezing” the conflict in the Donbas to weaken (read — to overthrow) and subsequent change of the Ukrainian government? It is unlikely that Russia's leaders are pursuing other, noble goals for our country, given the Kremlin its secret services and law enforcement bodies' direct military, economic, information, and “humanitarian” support bodies to “Novorossian” separatists, terrorists, as well as Moscow's desire to consolidate and finance “international Internationale” of the right-wing radical, neo-fascist, conservative-nationalist and other marginalized organizations in Europe. This again was clearly demonstrated at the recent International Conservative Forum in the “proletarian cradle of the Russian authorities” — St. Petersburg.

The Russian side continues the “hybrid war” against Ukraine

The moods among Putin's elite, Russian secret services and the military indicate that along with the statements about the desire to implement the Minsk-2 Agreements, the Russian side continues the “hybrid war” against Ukraine. With an emphasis on “forcing Kyiv to peace”, they use mechanisms for Ukrainian domestic destabilization (federalization) and provoking default with conservation of a real threat of “DPR/LPR”'s formations' full-scale offensive on Mariupol, Artemivsk and Severodonetsk-Lysychansk directions.

To form an appropriate community support to such plans, they also use political parties and movements, leaders and parliaments of subjects of the Federation. All of them receive a “task” to prepare the public of regions to any political decisions of the President and the Federal Assembly of the Russian Federation up to “recognition of independence of the DPR/LPR in the administrative borders of Donetsk and Luhansk regions and their integration into Russia as the only way to stop the Ukrainian authorities' destruction of the Russian-speaking population of the East of Ukraine and to end the war. “Undoubtedly, the Russian back of beyond could provide the necessary mass-collective “initiating” of appeals to the President and Parliament of the Russian Federation.

Despite the seeming optimism of Putin's supporters' reports, not everything in the Russian economy, society, and autocracy is ready for such radical changes. Even the tame MFA has to publicly recognize the Russia's leadership's being not ready to implement in the short term “the Crimean scenario” in the Donbas. Why is that?

First of all, because of the unity of the world's leading countries not only in the estimates, but also in modern ways of solving conflicts and crises, demonstrated by the leadership of the EU institutions and the leaders of G7. No less critical for such Kremlin's decisions is the real financial, economic, socio-political and military situation, taking into account Putin's global-revanchist plans, including the Ukrainian direction. Even the Russian ruble reacted to the President's “direct line” — within the first hour of the “dialogue with the people”, it fell from 49.7 to 50.3 rubles per 1 US dollar.

In fact, negative trends are evident in all sensitive to the effects of sanctions indicators of financial, economic and social life of the Russian Federation. That is why high-ranking officials and parliamentarians have to adjust the federal budget for 2015 and the three-year (2015-2017) in the direction of reducing the budget, especially social, spending. On 15 April 2015, the Federation Council approved changes based on more realistic forecasts (1 barrel of oil for 50 US dollars and 61.5 rubles for 1 US dollar). They planned to increase the 2015's budget's deficit to 3.7 % of GDP (instead of the previously planned 0.6 %) and the reduction of all articles by 10 %. Monetary wages of guards of the regime — military, law enforcement agencies, special services, judges and others — won't be indexed either. In fact, this is the first Federal budget's sequestration in the past 15 years, while Putin speaks about the sanctions' doing well to the Russian economy and citizens!

This is the first Russian federal budget's sequestration in the past 15 years

At the same time, analysts ascertain the growing imbalance in the system of strategic planning and management in the Russian Federation. This trend manifests itself in inconsistencies of the government's declarative anti-crisis program for 2015 with objective parameters of the financial aspect of its implementation, covering the budget deficit mainly due to the Reserve Fund (the amount of the accumulated funds only for the period from January 1 to March 1 was reduced by more than 10 billion US dollars, to 77 billion US dollars with a negative trend to the end of the year), which will require another introduction of changes to the budget-2015 (probably in autumn of this year), as well as in the Russian authorities' abandoning the concept of fulfilling social obligations to the society.

Of other destructive indicators, experts highlight the following:

Accelerated pace of reduction of international reserves of the Bank of Russia to maintain the ruble exchange rate in the range determined by objectives/benchmarks of 2015 — 61-62 rubles for 1 US dollar (in reality the Russian authorities spend for these purposes for one day of the Stock Exchange's work 1 billion US dollars);

Russian banks' increasing the dynamics of growth of losses (in January — 24 billion rubles, in February this year — 36 billion rubles);

Large-scale money emission (2.2 trillion rubles in January of this year alone); outflow of foreign capital in excess (Ministry of Finance and the Central Bank of the Russian Federation forecast it at the level of 100 billion US dollars by the results of the current year, which can be considered low estimate);

Lowering by international rating agencies of the ratings of subjects of the Federation and leading Russian companies;

Growth of the risk of bankruptcy for every fourth enterprise;

Reduction of subsidized financing of regions, in particular of Chechnya (causes significant dissatisfaction with the regional elite, up to the conflict between the head of the PA S. Ivanov and R. Kadyrov);

Deterioration of the situation at the labor market at faster pace in 81 out of 83 subjects of the Federation.

To preserve the controlled development of the internal situation in the country, the losses at the economic front are compensated by the Russian authorities by mobilization ofadministrative resources on the socio-political direction. For this end, the Kremlin is implementing measures aimed at ensuring a high level of public confidence in the policy of the President of the Russian Federation (at the expense of full pro-Putin dominance of ideology in the domestic media space), closing the channels of external financing of the opposition, as well as empowerment of law enforcement and intelligence agencies in the pursuit of V. Putin's political opponents. Even V. Putin's frank admission of the fact of using of the Russian Federation's military resources for the annexation of the Crimea becomes a way of further consolidation of the Russian society.

In the same context, they intensify the control over the work of local authorities (in order to prevent uncontrolled transfers of regional elites, which can unbalance the created and maintained by V. Putin system of counter-balances in a relationship with so-called “Pressure groups”), oligarchs and business elites (through the slogan of “strengthening the social responsibility of big business”). There are also carried out demonstrative “operations”, demonstrating to a Russian Everyman the effectiveness of the RF President's anti-corruption policy (the removal and arrest of governors, inspection of state monopolies, and so on). At the same time, in the compensation due to budget losses from the introduction of West's economic sanctions, Putin chooses only representatives of his closest business environment. It is playing into our hands, will only intensify the competition and disagreement both among the conservative forces of the environment of the President of the Russian Federation, and between the “siloviki” and “liberals” for redistribution of assets and the right to determine the candidacy of the “successor” (the leaders of the PA S. Ivanov and V. Volodin, Defense Minister S. Shoygu, the Speaker of the State Duma S. Naryshkin consider themselves as such).

Apart from the public-propaganda direction, which “master of the Kremlin” is not ready to sacrifice, is strengthening of the military potential of the Russian Federation, which accumulates all available financial, economic and technological resources of the country. Of course, despite the financial and material needs of the industry and social demands of the citizens, the increase in defense spending has also a political component — to demonstrate the “great Russia's that is reviving” ability to strengthen the military component of the country (especially the nuclear one) without the use of Western technologies and components. At this, we should not forget about the task set by the President of the Russian Federation to ensure by 2021 the Russian military's readiness to implement “any orders for protection of Russians abroad.”

On the altar of implementation of these expansionist plans, Putin can put the Russian economy

On the altar of implementation of these expansionist plans, Putin can put the Russian economy. However, taking into consideration the objective difficulties (which heads of the Russian Defense Industry are trying to hide), “master of the Kremlin” at the meeting of the Military-Industrial Commission January 20, 2015 had to agree to postpone the preparation of a new state armaments program for 2016-2025 years “because of the lack of objective forecasts of development of the Russian economy in the medium and long term”. Besides, serious shortcomings were found out in terms of availability and price parameters of submarines of “Borey” and “Yasen” classes, surface ships, promising tank “Armata” and other very necessary for the modernization of the RF Armed Forces equipment and weapons.

Implementation of the policy to establish in the Russian Federation a closed production cycle of weapons and military equipment, taking into account the goal-orientation of the State Armaments Program for 2016-2025 years (equipping the Armed Forces with modern types of armament at the level of 70 % by 2020) and promotion of Russian military products in international arms markets, will be significantly complicated by restrictions imposed on the Russian defense industry's access to foreign (Ukrainian and Western) technologies and components, its critical dependence on the supply of high-precision equipment and hardmetal tools. International experts have questioned the ability to fulfill the tasks of the state defense order for 2015, namely to bring the share of modern samples of weapons and military equipment in the Army and the Air Force of the Russian Federation up to 33 %, in Airborne Forces — up to 40 %, in Navy and Strategic Rocket Forces — up to 54-57 %.

However, even with this situation, Putin is not ready to give up support for armed groups of separatists of DPR/LPR, supplying them with arms, military equipment, Russian “military-vacationers” and terrorists-“volunteers”. Moreover, there are talks about the possibility of the Ministry of Defense of the Russian Federation's buying from South Korea the heavy machinery of Soviet/Russian-make (70 BMP-3, 70 BTR-80 and 30 T-80U, produced in the Republic of Kazakhstan in 1996-2006 as repayment of 2-billion Russian debt) which the South Korean Defense Ministry has decided withdraw from service in 2015. Military experts point to a high probability of its conversion and then being sent by the Kremlin as “humanitarian aid” to pro-Russian rebels in the East of Ukraine. Besides, taking into consideration the small protest potential of the Russian society and social consequences of militarization of the Russian economy for the depressed regions of the Russian Federation, among the population could increase the number of residents who want to join military service under the contract and to take part in the fighting on the side of separatists in the East of Ukraine (primarily as a perfectly acceptable way to earn money).

Among the foreign policy tools used by the Kremlin to “solve” the Ukrainian issue and to get rid of sanctions, the major ones are as follows:

Provoking disagreements among key world players (the United States, EU, UN, NATO and the OSCE) and within individual states/international organizations about resolving the Ukrainian crisis;

“Bribery for loyalty” of governments and business communities (Hungary, Slovakia, the Czech Republic, Bulgaria, Cyprus, Greece, Austria, Germany, France, Italy, Spain, USA and others.);

Demonstration of military activity, including the Armed Forces exercises. Maintaining a constant tension in regions of strategic priority for the most consistent allies of the USA and Ukraine among the European countries (the UK, the Baltic States, Poland, Romania, Scandinavian countries);

The use of the West's being interested in matters of mutual interest (the Iranian and Syrian issue, the fight against terrorism and so on).

The use of international organizations, in particular the UN General Assembly and OPEC, to promote profitable for the Kremlin decisions including those having to do with the order of imposing sanctions;

Maintaining an intensive dialogue with the BRICS and the SCO, as well as Turkey and Saudi Arabia.

Even the leaders of Belarus and Kazakhstan already consider Russia as a source of threats to the stability of their governing

Summing up, we can say that the expected in the 4th quarter of 2015 Russian economy's entering a phase of acute systemic crisis with tangible social consequences, as well as the forecasted prolonged (up to 2017) its decline in the situation of continuation of Russia-West confrontation, sanctions and low oil prices are not concerned by Putin as a significant factor, which could induce him to abandon further implementation of the expansionist policy towards Ukraine.

 

Despite the Kremlin's (sometimes successful) attempts to create external conditions for the United States, France, Germany and the EU in order to make them take compromise decisions on the Russian-Ukrainian conflict and lift economic sanctions, as well as Moscow's active promotion of the version of “freezing” the conflict in the East of Ukraine, even the leaders of Belarus and Kazakhstan already consider Russia a source of threats to the stability of their governing. As a result, it makes them more and more distance from the support of the Kremlin's policies on the Ukrainian direction.

 

Despite its limited by external sanctions and internal problems, abilities, the Kremlin will use all available resources to maintain a “hot” phase of the conflict in the East of Ukraine during 2015 by keeping the RF Armed Forces' groups along the border, and directly on the territory of our state, to continue military-technical, economic, and political support for the self-proclaimed “republics” in order to expand the territory controlled by the terrorists as a prerequisite for systematic destabilization of the situation in Ukraine and imposing profitable for Moscow variants of resolving the crisis.