Vladimir Putin’s speech in front of the UN General Assembly, topped off with a meeting with Barack Obama became a media sensation even before it happened. And when it did, it was pretty much what everyone expected. What Putin most succeeded in was creating a Cold War-like atmosphere, in which Russia was a force to reckon with, to listen to and to cooperate with in order to keep an even bigger evil at bay. Putin’s stunt was especially spectacular considering that the Chinese president, Xi Jinping, presiding over a much stronger and – despite its internal problems – healthier global power, was also visiting the US at the same time, and Putin managed to steal much of the attention. Will Putin’s speech in the UN be as memorable as Khrushchev’s shoe-banging, only for the right reasons this time, or was it a miscalculated attempt to steer away from a fatal collision?
Putin’s speech did not contain any novelties. Nothing was said about the Syrian crisis or Russia’s role in solving it that the Russian president had not said before. Neither did the meeting with Obama result in anything new. It rather emphasised the two sides’ fundamentally different understandings of geopolitics, with America on the side of freedom and Russia on the side of “stability”. Putin’s main points to make were the speech and meeting themselves.
The Russian president may have visited America, but the real addressee of the visit – and of the bombing of Homs – was the European Union, lost in its own helplessness about the refugee crisis. Putin wanted to remind the EU that the root of the crisis, the Syrian war cannot be solved without Russia, and also that Russia can make it worse, if it wants. Most of all, he wanted the EU to see that America had already realised this.
Without a doubt, Putin found the perfect opportunity to take a leap out of the pit that he had dug for himself. Press reports claimed that the shared hysteria of EU member states over the refugee crisis was an important reason why Obama sat down with Putin. Another reason was that by funnelling arms and troops into a country that neither America, nor Europe dares to touch, Putin forced NATO to cooperate and make Bashar al-Assad part of the endgame. The Syrian airstrikes also offered Putin a way out, in terms of communication at least, of an increasingly pointless adventure in Eastern Ukraine. Even more importantly, it allowed him to promise the Russian political elite that mending fences with the EU was within reach after Russia’s Chinese pivot proved to be half a disappointment.
Neither of these steps, call them posturing or a strategy, will help solving Russia’s domestic problems. The outlook for the Russian economy is still dire. Oil prices will prevent the government to pass a generous budget for 2016, the year of the Duma election. Due mostly to rising food prices and a weaker ruble, poverty rose so significantly that the government is contemplating a $3.6 billion food stamp program. Even with elections coming up, there is open talk about raising the retirement age, since the present system cannot bear the burden any more.
And it is not only citizens who pay the price of Russia’s increasing isolation. Russia’s 500 biggest companies, many of which cannot get credit in the West, are swamped with debt: their aggregated liabilities grew by almost 40 percent in 2014, and are now larger than the entire Russian federal budget. Low oil prices prevent energy companies from making large profits, but still 98% of all profit made in Russia was earned by them. Milking these companies further may seem an obvious solution, but a plan to change the way the mineral extraction tax is counted to bring in further revenues was heavily contested by oil companies and several members of the government. And this is understandable: the energy industry is in a bad shape. The implementation of the gas deals that Russia signed with China last year – and which were quite unfavourable from a Russian point of view even then – will probably be postponed. Gazprom is not the Russian government’s heavy hand in Eastern Europe any more, either. The state oil giant Rosneft is only in a mildly better shape. Talks with OPEC on global oil supplies ended without a result and amidst falling revenues, many suspect that the company is looking for prey elsewhere: for example, in Sakhalin and the Komi Republic, two oil-rich regions, where governors were recently arrested on corruption charges. Vyacheslav Gaizer, the President of Komi is said to be an ally of Rosneft’s rival, LUKOil Whereas the details of both arrests are muddy, it is certainly not unlike Rosneft to use such means of coercion. Last year, Rosneft was suspected behind a court case that ended with the seizure of Bashneft, another lucrative oil company.
But regional elites are not only frustrated in oil-rich regions. Last week, Irkutsk’s governor of the governing United Russia party was defeated by his Communist opponent in the second round of the election, even though he came first in the first round. This is, of course, not a real opposition victory: the Communists are part of the “systemic” opposition. But the Irkutsk election shows how the Russian government is trying to channel political competition to the regions, either to keep regional elites at bay or to placate sham opposition parties and prevent political competition from emerging elsewhere. But it hurts regional elites who are asked to deliver more (both in terms of politics and policies) while they receive less (both in terms of political and budgetary support).
Putin’s American visit and Russian airstrikes in Syria will not change any of this. Unless, of course, through them Russia convinces the EU to withdraw or ease sanctions.
Reading between the lines
Withdrawing sanctions would not solve the problem of low oil prices. Neither would it delay the implementation of international court decisions unfavourable to Russia (even though the Russian government may count on this). But it would give a breath of fresh air to the rouble, it would open up Western credit for Russian businesses, it would ease inflation and it would make investment return to Russia. If Russia’s airstrikes in Syria and Putin’s visit to New York have a purpose, it is this.
Again: Vladimir Putin found the perfect time to slam his offer on the table. And as all Russian offers, it contains a layer of promises, a cup of posturing and a hint of blackmail. The question is whether it also contains the possibility of Russian withdrawal from Ukraine. If the answer is yes, then sanctions can be lifted but Putin will make a considerable sacrifice, which will not be easy to replace in rhetorics or in actual policy. If the answer is no, it is probably a shocking miscalculation.
Obviously, nuances matter, and there is space for a compromise about the Donbass. A compromise that may benefit Russia much more than the continuation of the war. Therefore much will depend on the sobriety of an increasingly hysterical European political elite. In the light of Putin’s Cold War-like bling in America, weakness may be difficult to see, but the EU has to keep in mind that the Russian president’s new offer is also the admission of the fact that not even Russia’s leaders expect the economy to get growing before the 2016 election.
Vladimir Putin is brilliant at bluffing. The EU needs to get better at playing a better hand.