1. Russia as a dynamic and unsatisfied power
Russia is not the Soviet Union, although old habits die hard. The Russian default of 1998 led to spectacular growth and a surprisingly quick recovery boosted by the rapid rise in the oil price. Following the Norwegian example, the windfall was channelled into Sovereign Wealth Funds. Optimism and the spirit of reform came to an abrupt halt with the expropriation of Russia’s largest oil company, Yukos, in 2003. It demonstrated arbitrariness and the lack of property rights in a country ruled by man, not by law. Subsequent tightening of the control of the political system and the media brought about fundamental changes to a society that had experienced an unprecedented period of individual and political liberty since the implosion of the Soviet Union. Russian political institutions remain weak and, unlike China or indeed the USSR, it has neither a system of succession nor a procedure to renew its leadership.
The essence of modernisation, structural reforms of the economy and the social system, were postponed and neglected. After a decade of unprecedented growth that saw a historic rise in living standards, Russia encountered the financial crisis in 2008 unprepared. With the help of the accumulated reserves, companies and banks were bailed out and the subsequent rise in the oil price stabilised the economy for a while, but no reforms were initiated. After the collapse of the oil price in 2014, Russia could not repeat the bail-outs of 2008–09 without risking depleting its reserves. The Government is clueless in the face of a continuing downslide. Without growth and investments, stabilising the rouble and securing the reserves will not suffice. It will eventually lead to budget sequestration with dire social consequences, which will ultimately affect military expenditure as well.
The implosion of the Soviet Union saw the territory directly controlled from Moscow shrink to pre-Petrine borders. Slavic and Orthodox lands from North Kazakhstan to Belarus and Ukraine became part of independent states.
The partnership with the West declined in stages until the war in Ukraine resulted in a sharp deterioration in relations. The abrogation of the ABM Treaty by the United States in 2001 alerted Russia to the need to safeguard its second strike capability as the foundation of its status as the other nuclear superpower. The war in Georgia in 2008 demonstrated Russia’s willingness to engage in wars beyond its borders. But the poor performance of the Russian Armed Forces during the war in Georgia also revealed that Russia’s military did not possess the required capabilities to support Moscow’s for-
