Putin's Year of Living Dangerously

MOSCOW – In the spring of 2008, Russian President Vladimir Putin was on top of the world. Oil and gas prices were sky high, with export revenues flooding the Kremlin’s coffers. The country’s once powerful military, which collapsed with the demise of communism in 1991, was being rebuilt. And Putin’s handpicked successor, Dmitri Medvedev, had been eased into power, while Putin downshifted into the premiership.

The United States, moreover, remained a perfect foil for a leader with pretensions to global leadership. The Bush administration’s incoherent foreign policy included a plan to build a missile defense shield in Poland and the Czech Republic, which allowed Putin to revive the Old Europe/New Europe divisions that began with the Iraq war, with this split appearing to enhance Russian influence on the continent.

Russia’s seeming military revival also played a part in boosting the domestic economy. Arms sales, worth close to $8 billion, were again competing globally with Great Britain and the US, going to nearly 80 countries, including Venezuela, China, India, Algeria, Iran, Malaysia, and Serbia. And those arms sales were often closely tied to Putin’s foreign assertiveness, with the Russian army training and holding exercises in many places for the first time, including Venezuela, as if in preparation for another Cuban Missile Crisis, with Hugo Chávez assuming the role of Fidel Castro.

So good did things seem that Russia suddenly discovered that, perhaps for the first time since the early days of the Soviet era, the country actually had some “soft power.” This first became apparent when the International Olympic Committee awarded the 2014 Winter Games to the Black Sea resort of Sochi. In 2007, Putin addressed the Olympic Committee (in English), and persuasively argued that the Games will “play a major role in Russia’s future. They will help Russia’s transition as a young democracy.”

In May 2008, Russia won the world hockey championship, beating Canada. In June, it almost won the Euro 2008 football championship, losing in the semi-finals to Spain. Next came the Eurovision Song Contest, an annual competition of pop (rarely first class) European singers, at which Russia’s Dima Bilan gained first prize for his musical clip “Believe.” That, too, helped rekindle a sense of national pride, extending from the Kremlin to the streets.

Russians habitually respond with black humor to events both good and bad, and the events of 2008 were no exception. One joke nicely encapsulates the hubris that Putin and his Kremlin allies felt: Putin and Medvedev discuss their newly found invincibility. “Eurovision, hockey, soccer, smooth presidential transition – what a lucky streak,” muses Medvedev. “Indeed, time to initiate World War III,” enthuses Putin. But, as usual, pride precedes a fall.

The fall began with an event that Putin perceived as a mighty triumph – his blitzkrieg in August against Georgia. Yes, the Kremlin was able to smack down the uppity Mikheil Saakashvili’s hope of reuniting his country by force. But the world saw in Russia’s onslaught against so puny an antagonist a thuggish state determined to recapture its lost empire.

All the post-Cold War certainties in Europe melted away, and with them went Putin’s reputation as a reliable manager of Russia’s economy. Capital began to flee the country, which may not have mattered had the world economy not tanked in September. But tank it did, taking Russia’s economy with it.

The reserves that Russia accumulated during the oil boom years are steadily being drained away. With oil prices collapsing, this pool of resources won’t be refilled quickly. That could prove to be devastating, because all of Russia’s fiscal assumptions were based upon high oil prices continuing for years to come.

Nevertheless, Putin is trying to spend his way out of the crisis. But such efforts are unlikely to be enough, because the heavy-handed state-dominated economy – with ex-KGB agents now embedded at the top of most state companies – lacks both the nimbleness and the diversification to recover speedily.

Moreover, with animosity between East and West at their highest since the Cold War’s end, Russia’s trading partners are anxiously looking for other options, which may mean that Putin has damaged Russia’s long-term prospects for an export-led recovery as well.

Indeed, the Georgian war antagonized not only the west, but also China, which has a vital strategic interest in maintaining the post-Cold War geo-strategic settlement. China, after all, has no desire to see a “Soviet Reunion” on its border.

Besides antagonizing China, the Georgian war also exposed the hollowness of Russia’s military re-armament. Yes, the Russian army could smash Georgia and most of its ex-Soviet neighbors, but its performance in Georgia shows that it remains the same lumbering, badly motivated outfit that it was in the 1990’s.

Now that America is no longer saddled with a president loathed around the world, Putin has lost one of the key tools that had helped him boost Russia’s international standing. Poking Bush in the eye was a fine thing to do in the eyes of many people, particularly in Europe. But to greet the elegant and popular President-elect Barack Obama with threats to station missiles on Europe’s borders, as Medvedev did the day after America’s presidential election, exposed before the world the Kremlin’s ham-handed ways once again.