The Logic And Risks Behind Russia's Statelet Sponsorship from STRATFOR

by Reva Bhalla

Mother Russia can be quite generous when it comes to her collection of statelets. In the early 1990s, when a broken Russia had no choice but to suck in her borders, a severely distracted Kremlin still found the time and money to promote and sponsor the fledgling breakaway territories of South Ossetia and Abkhazia in Georgia and Transdniestria in Moldova. And as Russia became more economically coherent over the years, the number of Russian troops in these territories grew, and a bigger slice of the Russian budget was cut out to keep the quasi-states afloat.

These post-Soviet statelets have a good deal in common. They are all tiny - South Ossetia is roughly 3,900 square kilometers (1,500 square miles) and has about 40,000 inhabitants, Abkhazia covers 8,500 square kilometers and its population is about 240,000, and Transdniestria is 4,100 square kilometers and has a population of 555,000. They are also all economically isolated, effectively run on black and gray economies, and are largely dependent on Russia's financial largesse for survival. Most important, from Russia's point of view, they each occupy strategic spaces in the post-Soviet sphere where Russian troops and thus the potential for further intervention can apply acute pressure on Georgia and Moldova should they draw too close to the West. The presence of Russian troops in these breakaway territories forms the tripwire that any Western patron will be wary to cross when it comes to defending those countries in their time of need. This, after all, is the true deterrent value of statelet sponsorship.

But Russia's strategy has also gotten to be a lot more burdensome and much more complicated in recent years. In addition to readopting Crimea (covering 26,000 square kilometers with a population of 2 million), Russia has added to its basket of statelets the self-proclaimed Donetsk People's Republic and Luhansk People's Republic (16,000 square kilometers collectively with a population of 1.5 million and 2 million, respectively) in eastern Ukraine. Though exact figures are hard to come by, various compiled estimates show Russia has annually been injecting about $300 million into Abkhazia and at least $100 million into South Ossetia and Transdniestria each to finance their annual budgets, provide cheap fuel, pay pensions and so on. In addition, Russia has allocated at least $2.42 billion in 2015 to support Crimea (not including military costs) and, according to a report written by Higher School of Economics analyst Sergei Aleksashenko, Russia has allocated at least $2 billion in the federal 2015 budget to sustain its military support in eastern Ukraine, a figure that continues to grow.

And the list is only getting longer. As the world has observed in recent weeks, Russian military support for Syrian loyalist forces in the coastal Alawite enclave of Latakia has dramatically increased, with all signs pointing to a long-term stay. Knowing that any negotiated settlement is likely to fall apart in the end, the Russian plan is to help Syria's Alawites carve out a de facto state. Meanwhile, back in the Caucasus, the long frozen conflict of Nagorno-Karabakh may also be taking a significant turn in the coming months. We see growing indications that Russia and Azerbaijan may be collaborating to shake up the status quo between Azerbaijan and Armenia, with Russia readied to send in peacekeepers and stay for the long haul in a bid to tighten its grip in the region.

From eastern Ukraine to Alawite Syria to Nagorno-Karabakh, Russia appears to be making a conscious effort to widen its footprint in strategic spaces. This will be a pricey endeavor, but the geopolitical logic behind these moves is not lacking.

Whether strong or weak, capitalist, communist or tsarist, Russia will be compelled to anchor itself to natural geographic barriers for its own security. In eastern Ukraine, the natural Russian extension is to the Dnieper River, and short of reaching that river, Russia will try its best to use the separatist regions to both undermine Kiev and create an imperfect buffer against NATO's growing involvement with Kiev. The Crimean Peninsula reinforces Russia's hold on its only warm-water base at Sevastopol on the Black Sea, and naval projection on the Black Sea gives Russia access to the Mediterranean. The ports of Latakia and Tartus on the Syrian Mediterranean coast - an Alawite stronghold now depending on Russian aid - gives Russia a physical foothold in the eastern Mediterranean and a platform to influence power plays in the Levant. In the mountainous Caucasus, where Russia has already been strengthening its presence in Georgia's breakaway territories and remains Armenia's only real patron, a developing bargain with Azerbaijan over Nagorno-Karabakh has the potential to expand Russia's presence even more and thus reinforce a Russian buffer to the south.

A Buffer in Eastern Ukraine

In order of priority, Russia's position in eastern Ukraine comes first. Ukraine, from centuries past to today, forms the soft underbelly of the Russian state that must be insulated at all costs. If Ukraine comes under significant influence or control of a Western power, the Russian southwestern flank will be laid bare. But Russia is not strong enough to anchor itself on the Dnieper River and absorb both the military and economic costs of such an endeavor. So Russia must settle. The best Russia can do at this point is to try to consolidate autonomy for the eastern rebel provinces, using its tight grip over separatist commanders to dial up and down the conflict as the need arises. If Russia feels as though its demands are being ignored when it comes to NATO's buildup, sanctions or the like, violence in eastern Ukraine flares up. Once the Germans and the French get the message and start pressuring Kiev to make certain political concessions, the fighting quickly de-escalates.

This is a pattern that all sides are getting used to, but it is still far from ideal for Moscow. No matter what negotiations are in play, Russia is not about to withdraw its military foothold in eastern Ukraine. At the same time, that military dynamic provides the foundation for a pro-West Kiev to lean on the United States for help in defending itself against a persistent Russian threat. Russia must therefore carefully calibrate its military moves in eastern Ukraine, making clear that any Western push would risk a direct confrontation with the Russians, but also not going far enough to where its actions compel a U.S. response that could cause the Russian buffer to recede even more in the end.

Preparing for an Alawite Statelet in Syria

Russia's moves in Syria are deeply intertwined with this dynamic in Ukraine. Even as Russia is locked into a long-term tug-of-war with the United States over the former Soviet rim, Moscow needs mutual areas of interest on the periphery to shape a dialogue with Washington. The Russians see the conundrum the United States is in, trying to fight the Islamic State with the help of regional powers while also trying to avoid the messier process of wholesale government change. Since early this year, Russia has been expending considerable effort to try to cobble together a negotiation that would outline the shape of a post-Bashar al Assad state, making itself appear as an indispensable partner to Washington when it comes to finding an end to the civil war. The United States needs this negotiation, and it needs the backers of the al Assad government, Russia and Iran, to bring the loyalists to the table. The more the United States depends on Russia to facilitate the negotiation, so goes the Russian logic, the more leverage Moscow has to negotiate limits on Western encroachment in Russia's immediate backyard.

But Russia is also not under any illusions when it comes to bringing peace to Syria's warring factions. Any negotiation is doomed to fail so long as the more intractable and competent rebel factions prefer the battleground to the negotiating table. Russia's strategy thus comes in two parts - it must create a credible basis for a negotiation over Syria that it can use as leverage with the United States, but it must also prepare for the worst to protect its position in the eastern Mediterranean for when that negotiation inevitably falls apart. Russia's substantial military buildup at the ports of Latakia and Tartus on the Alawite coast in recent weeks, to go along with its existing naval depot at Tartus, speaks to both of these objectives.

For the Syrian government to be comfortable entering negotiations, it needs to first feel secure in its core territory, running from the south through Damascus up through Zabadani and parts of Homs and Hama to the Mediterranean coastline. This is a plan that Russia and Iran are working closely together on. (Qassem Soleimani, an Iranian major general and the commander of the Quds Force, is rumored to have traveled to Moscow earlier in September to meet with Russian President Vladimir Putin and Defense Minister Sergei Shoigu to discuss the implementation of this strategy.) A look at the satellite imagery of Russia's buildup so far shows airfield construction, possible control towers and housing for troops. Russia appears to be building up the logistical capability to stage aerial assets, such as fighter jets and helicopters, to help reinforce the Alawite statelet. Stratfor sources have indicated that Russia's military buildup in Syria so far has cost around $500 million, sourced from the military budget of Russia's Black Sea command, while the military equipment Russia is deploying to Syria remains under Russian control. In essence, the Russian-Iranian plan enables the Alawites to enter a negotiation on a stronger footing, but also with the security that they will have a de facto Alawite state to fall back on as the Syrian state formally fragments with time.

A Shake-Up in the Caucasus?

Further under the radar, we can see Russia's strategy in the Caucasus starting to evolve after more than two decades of frozen conflict between the former Soviet states of Azerbaijan and Armenia over the tiny enclave of Nagorno-Karabakh. Nagorno-Karabakh (4,400 square kilometers and now a majority Armenian population of around 150,000) has been under the de facto control of Yerevan since a 1994 cease-fire ended the war between the two foes. Economically isolated, Armenia hosts some 5,000 Russian forces and sits firmly under the Russian security umbrella, lacking alternative patrons. In contrast, Azerbaijan, far less geographically constrained and endowed with energy resources, likes to keep its options open, always opting for a balance between the West and its former Soviet roots. That said, Azerbaijan and Russia have been a lot cozier than usual in recent months, raising questions in our mind whether Moscow has enticed Baku with an offer pertaining to the fiercely nationalist topic of Nagorno-Karabakh.

Azerbaijan is fed up with negotiations mediated by the Organization for Security and Co-operation in Europe and wants to see if it can put its years of military preparations to work to retake the territory. Armenia, occupying the territory's high ground and thus holding the strategic advantage over Azerbaijan, would obviously prefer to keep the status quo. The only way Armenia would likely be forced to renegotiate terms on Nagorno-Karabakh is if hostilities resumed and Russia, Armenia's sole patron, were to play a dominant role in mediating their end. It is little coincidence that the Armenian rumor mill has been buzzing with speculation that Russia and Azerbaijan are developing an understanding that would have Russian peacekeepers occupy and neutralize the territory. We are doubtful that this plan could be imposed on Armenia solely through diplomatic means.

While we cannot be sure that this scenario will ultimately play out, we have collected enough clues to date that put a Nagorno-Karabakh shake-up high on our watch list. And with Nagorno-Karabakh on the list of territories up for Russian adoption, Russia's commitment to creating new footholds abroad has the potential to expand even more.

The Costs of Sponsorship

Russia's strategy may not be cheap, but it is entirely rational from a geopolitical point of view. Russia is weakening internally at the same time it is confronting a strong and growing threat from the United States on its former Soviet doorstep. While Russia is still in the game, it might as well create and reinforce as many perches as it can in its near abroad to leverage against the West and maintain whatever influence it still holds in preparation for much more difficult years to come. Thus, the bill that Moscow is footing for its statelets, even factoring in a volatile ruble, may still be quite reasonable from a Russian perspective. Operating from a low and still rough estimate, we can assume that Russia is spending at least $5 billion annually on these quasi-states, which is still less than 3 percent of Russia's 2015 federal budget of $206 billion. This amount does not include the large amount of pre-allocated defense budget that goes into the Ukraine and Syria operations. There is also an opportunity cost to bear in mind. Pre-allocated military resources cannot be redirected to other purposes, such as procurement, training, and research and development unless the defense budget as a whole continues to increase.

However, the costs are not just financial. Nagorno-Karabakh is a tinderbox; once the conflict resumes, it will not be easy to contain. It is a region where both a resurgent Turkey and Iran will try to push back against an overly ambitious Russia. In Syria, the threat of mission creep is also real, since the loyalist government is combating an assembly of Sunni powers with a shared interest to undercut Iran. Moreover, with Russia preparing the ground for stationing aerial assets, it must calculate the risks of operating in a crowded battlespace, with U.S., Turkish, Israeli and potentially other European and Arab coalition partners entering the fray. In Ukraine, just as Russian sponsorship of eastern Ukraine incrementally increases, a U.S. military buildup on Russia's European frontier will grow in kind. Ultimately, this is Russia's backyard, and Russia will be far more constrained than the United States when it comes to this level of competition. A statelet sponsorship strategy can go only so far.

"The Logic and Risks Behind Russia's Statelet Sponsorship is republished with permission of Stratfor."