*** Russia Falls Into Old Habits

by Lauren Goodrich

25 October 2016

Nearly 10 years ago, Stratfor published a series on Russia's historical boom-and-bust cycle. At that time, Russia was clearly at the height of a boom, rebuilding itself into a stable and robust power. Today, the country is quickly descending into the next, less pleasant stage. The strategy that revitalized the country is becoming less effective, forcing Russia and its leaders to act more aggressively at home and abroad.

Though still assertive, Russia is no longer acting from a position of strength. The country may maintain some semblance of strength for years to come, but its fragility will eventually become apparent, forcing it into the next phase of the cycle.

Geography's Role in Russian History

For nearly eight centuries, Russia has been trapped in a loose cycle: It rises from chaos, returns as a regional and sometimes even global power, grows aggressive as the system cracks, and then collapses before rising again. The cycle is less about political choice than it is about geographic constraints. Geographically speaking, Russia is operating from an inherently weak position. It is the largest country in the world, covering roughly 13 time zones (split now into four mega-zones). Yet 75 percent of the country is virtually uninhabitable frozen tundra that becomes marshland in the summer, making domestic trade extremely difficult. Maritime trade is also difficult for Russia, given that its only warm-water port, on the Black Sea, is blocked by rivals, including Turkey. Therefore, the country has struggled to develop economically.

Furthermore, Russia's heartland - which runs from St. Petersburg south through Moscow and into the Volga region - lies on a series of plains, making it vulnerable from all sides. This has forced Russia to seek to expand its borders and influence outward to create a buffer zone between its heartland and rival regional powers. As Catherine the Great famously put it: "I have no way to defend my borders except to extend them." The longest sustained example of this expansion occurred during the Soviet period, when the Russian heartland was shielded by Siberia, 14 other Soviet republics and seven Eastern Bloc countries.

Expanding Russian influence comes at an immense financial, military, political and social cost. During the Soviet period, Moscow had to centralize control over the entire Soviet space, subsidizing most of the Soviet states' economies while managing their diverse populations. Moreover, Soviet gross domestic product was half of U.S. GDP, even though the two countries had roughly the same population. By the last decade of the Soviet Union, Western intelligence sources estimated that half of Soviet industrial output went toward building up the military, causing vast shortages of industrial goods. Thus the dilemma: Russia must expand to survive, but that expansion is unsustainable and has historically led to its collapse.

A Perpetual Cycle

Russia's cycle can be divided into roughly three parts: collapse, resurrection and fragility. It starts with a catalyst that causes governance to break down and disrupts the social order, leading to collapse. Historically, this has taken many shapes. In the 13th century, it was the Mongol invasion; in the 17th century, the Time of Troubles; in the 20th century, the Russian Revolution, fall of the Soviet Union and the 1998 financial crisis.

From collapse comes the next stage of Russia's cycle: resurrection. Typically the system that governed during the crisis is transformed into something new - usually with a strong personality at the fore. This figure tends to create a stable system in which Russia can consolidate itself and its borderlands. This figure also fosters a sense of national identity, helping Russians and peripheral populations unite under a common patriotism.

Examples include Ivan III, who threw off the Mongol yoke and united Russia; the first Romanov tsar, Mikhail I, who led Russia out of the civil wars of the 16th century; the "greats," Peter and Catherine, who transformed Russia into a global empire; Vladimir Lenin, who transformed Russia into the Soviet Union; and arguably, Vladimir Putin, who ushered in prosperity following the Soviet collapse.

None, however, has been able to overcome Russia's geographic challenge. All have fallen into the problematic pattern of trying to consolidate the heartland while expanding Russian influence, practically ensuring their own collapse. When the inevitable stress points begin to emerge - whether political, social, security or economic - Moscow tends to tighten its grip and to act more aggressively within and along its borders.

The leaders, who were once seen as the saviors of Russia, are either replaced with, or evolve into, more authoritarian (and often ruthless) leaders, who quash dissent and aggressively defend Russia's borders and borderlands. This is the age of fragility. Fragility leaders lack the stability their predecessors enjoyed and have less time to devote to consolidation and nation building, making them appear more erratic.

Brutal leaders often emerge from crumbling systems. The most famous fragility leader was the Soviet Union's Josef Stalin. Similarly, when droughts and famines followed Ivan III's and his successor's successful tenures, Ivan IV - aka "The Terrible" - severely restricted freedom of movement and lashed out in a series of wars against the Polish-Lithuanian Commonwealth, eventually leading to civil war after his death.

Throughout history, internal and external pressures first lead to political, economic, social and foreign policy stagnation before the cracks in the system force a complete transformation. At times, such transformations are simply political, such as the transition from Stalin to Nikita Khrushchev; at others, the entire system collapses into chaos, such as the fall of the Russian Empire or the Soviet Union. Then, the cycle begins anew.

Putin's Edition of the Cycle

The rise and endurance of Putin and his government fit within Russia's historical cycle. After the Soviet collapse, Russia lost direct control over its borderlands. The country devolved into chaos. Broken attempts to transition to a market economy through what was known as shock therapy only led to radical privatizations and the rise of oligarchs - which in turn resulted in a 40 percent decline in GDP and a deep financial crisis by 1998. The political landscape wasn't much better. The government was made up of dozens of parties with vastly different agendas all attempting to agree on a new political system. The security services and military were further degraded by President Boris Yeltsin. The Russian people struggled to find a new identity to unite them as the Soviet Union had. Rumblings of secession arose in many of Russia's regions, with a brutal war erupting between Moscow and its Northern Caucasus republics, particularly Chechnya.

A bureaucrat from St. Petersburg, Putin was appointed by Yeltsin to head the KGB's successor, the Federal Security Bureau, in 1998. The intelligence agency was charged with containing the chaos. Yeltsin assumed that Putin, a Moscow outsider, would not be able to challenge him. But Putin and his cadre of loyalists from St. Petersburg (many former KGB agents) took strong steps against the various problems facing Russia, and by the next year he was prime minister. Once in office, he continued to consolidate and rebuild the security services and military. He issued ultimatums to the Russian regions to support the government financially and politically and to cease talk of secession. Putin's efficiency began to convince many Moscow elites to support him, and he eventually supplanted Yeltsin as president.

At the time, Putin was seen as a great reformer, consolidating the country economically, politically and socially. He cracked down on the oligarchs, seizing strategic assets for the state - such as the highly coveted energy sector. He streamlined the political process, bolstering a single party under his control with the opposition parties built into a system he could manipulate. He reined in the unruly Northern Caucasus, dividing the region's militant groups and creating a broadly loyal Chechen force to help end the Second Chechen War. Perhaps most important, he made a social pact with the Russian people to stabilize and boost the country.

Good luck also helped. Global energy prices began to rise sharply in 2004 and natural gas demand in Europe rose dramatically - just as Russia got its energy production back up following the Soviet collapse. Flush with cash, Russian GDP rose tenfold between 2000 and 2009. Russians' standard of living increased fourfold, and real disposable income rose 160 percent. Unemployment and the poverty rate were reduced by half. But with more income came more military spending: Under Putin, spending on the military increased nearly fivefold.

For most of Putin's leadership, the Russian economy and its financial position have been relatively stable. This enabled Moscow to focus on its borderlands - and specifically to push back against what it perceived as persistent foreign encroachment following the Soviet collapse. NATO and the European Union had expanded into some of the former Warsaw Pact and Soviet states, either offering them membership or association agreements. But with the United States preoccupied with the post-9/11 wars in Afghanistan and Iraq, Moscow was able to gain traction against what it perceived as expanding foreign influence on its borders.

Russia made its own security alliances to counter NATO with the creation of the Collective Security Treaty Organization in 2002. Moscow also used its energy resources to manipulate alliances on its borders. It used a series of energy cutoffs to Europe to ensure that Ukraine and Georgia would not be admitted into NATO. Then, Russia invaded Georgia in 2008, and NATO did not intervene. In 2010, Moscow pressured Ukraine to elect a more Russia-friendly leader. From 2010 to 2015, Russia expanded its economic union with Kazakhstan and Belarus to include Armenia and Kyrgyzstan.

The West painted Putin as a thug and Russia as an aggressor, but the Russian people praised the man who helped their country return to being a regional, and even global, power. Putin fulfilled his social contract with the Russian public, and in return, the people loved him.

Signs of Weakness Presage the Next Phase

Despite Putin's popularity, his rule is beginning to show signs of weakness, and threats to Russia's stability and external influence are increasing. The cycle, it seems, has not been broken. In 2014, Russia experienced a series of blows to its power. First, the Russian-friendly government in Ukraine was overturned in another uprising, leading to a staunchly pro-Western government in Kiev. Moscow attempted to incite the country against what it deemed a Western-backed coup, but its attempts only revealed the limits of Russian power. Now, Russia has only limited influence in a sliver of eastern Ukraine held by Russian-backed rebels.

Russian actions in eastern Ukraine united the European Union and the United States to exact a series of economic sanctions on the country and on several of its citizens. Meanwhile, oil prices crashed, falling from triple-digit prices per barrel in mid-2014 to the low $40s per barrel today. The combination of low oil prices and conflict with the West caused foreign investment into Russia to plummet by 50 percent in 2014. By 2015, foreign investment fell to nearly zero. The Russian ruble fell by 40 percent in 2014 and remained volatile the following year, and capital flew from the country, $160 billion in 2014 and another $85 billion in 2015.

The Russian people are bearing the brunt of the economic pain. With the decline in the currency, 25 percent of Russians have had their salaries cut, and 15 percent have lost their jobs altogether. The average monthly wage has dropped to below $450 a month, less than in China, Romania and Serbia. On average, Russians have spent half their incomes on food this year. And more than half of Russians believe that their economic position will only worsen in the years to come.

The current recession in Russia differs from the 2008-2009 economic crisis, which was part and parcel of the global financial crisis. Moreover, this recession is coupled with foreign policy shortcomings in Ukraine and in its standoff with the West. Russia is now seen as isolated on the international stage. The Kremlin has sporadically rallied national support over the past two years with its annexation of Crimea and with its intervention in Syria against the wishes of the West, but such acts have only momentarily increased patriotism.

Instead, the economic and foreign crises are starting to burden Putin's government, forcing the Russian leader to become increasingly authoritarian, according to the cycle. Even Ivan the Terrible started out popular, carrying on his grandfather's push to transform Russia from a medieval regional state to a far-reaching empire. It was not until famines and failed wars began to threaten Russia that Ivan IV became the brutal leader he is now remembered as. Putin could meet the same fate. He faces similar dilemmas, and will soon have to make tough decisions on how to maintain power and stability and protect Russia's borders.

As cash flows diminish, the political, security and business elite that make up the current Russian government are grasping for assets and power. Previously, Putin has been able to manage such power-grabs, but over the past two years the elite have pushed back, leading to the fall of some of the most powerful men in the country. Increasingly concerned that those fallen leaders will band against him, Putin is surrounding himself with loyalists who have no power of their own. Progressively uncertain of the loyalty of the Russian military and security services, the Russian leader has also created his own personal military, the National Guard, made up of 400,000 troops directly accountable to him.

Putin has been able to rule Russia with an iron grip for 16 years because of his government's popularity, but this, too, is slipping. Approval ratings for the government have fallen from 66 to 26 percent, and Putin's personal approval rating has fallen from 88 percent to 74 percent over the past two years. In recent parliamentary elections in September, voter turnout was the lowest in post-Soviet history, revealing the lack of faith in the process and government. In those elections, Putin was able to massage the results enough to give his party, United Russia, a supermajority so he could push through the tough and unpopular legislation necessary to hold power. Under the increasingly authoritarian leader, the government passed a series of draconian laws to suppress the Russian people should dissent become instability.

These domestic challenges come as pressures on the country's borders continue to mount. Russia's intervention in Ukraine has vacillated between a frozen and low-intensity conflict. The West maintains sanctions on Russia and is even discussing expanding those sanctions because of Moscow's intervention in Syria. NATO continues to build up its position along Russia's periphery, and Moscow's attempt to gain leverage in its talks with the West via Ukraine and Syria has fallen relatively flat in recent months. Russia could ramp up hostilities in the various theaters under negotiation with the West, but this risks isolating and over-extending Russia even more - similar to what happened in the period between Leonid Brezhnev and Mikhail Gorbachev.

This is not to say Russia is on the brink of collapse, only that the country is entering the next phase of its historical cycle, in which the state is highly vulnerable yet increasingly aggressive. Putin will therefore be acting from a position of survival instead of strength. Russia could muddle along in its compromised position for some time, but eventually the cycle must progress, and the next phase of transformation will begin.

"Russia Falls Into Old Habits" is republished with permission of Stratfor.