Saturday, August 9, 2014

Window on Eurasia: Putin’s Economic Confrontation with West Will Destroy His Regime, Mitrokhin Says

Paul Goble


            Staunton, August 9 – Russia’s economy was already in trouble before the West imposed sanctions, and those sanctions could lead to the collapse of the Putin regime in time. But the Russian president’s decision to respond to these sanctions with a total economic confrontation with the West” will significantly “speed up” this scenario, Vladimir Mitrokhin says.


            In a commentary on yesterday, Mitrokhin focuses on what he says is the most interesting aspect of the deteriorating situation of Russian forces in Ukraine: “what influence will the military defeat of the terrorists have on the internal politics of Russia.” Neither of the two possible outcomes works to his benefit (


            In the first, the defeated forces would make their way to Russia and at a minimum cost Putin the support of those who wanted him to act more boldly in support of his Ukrainian adventure. Mitrokhin says he doubts this would lead to a coup given the tight control Putin’s security agencies maintain over the military.


            And in the second, Putin introduces Russian forces into Ukraine to “save” the situation, “first in the framework of a ‘humanitarian’ operation and then for holding the territories of the separatist republics according to the Transdniestria variant.” But that appears improbable because “it would mean an open war of Russia with Ukraine, the EU and North America.”


            At a minimum, Mitrokhin says, this would entail full-scale sanctions by the West against Russia, including a complete ban on the export of oil and gas to the EU and “the freezing of offshore accounts in European and American banks.”  That “would mean the rapid and inevitable end of the regime.”


            If Putin chose the first variant, he could have played for time because “political problems with the extreme right and military are on the whole something curable especially under conditions of nationalist hysteria which could be easily shifted toward a new object of hatred” by the regime.


            “But the events of the last week have shown that Putin has entered a state of war with the West in which major mistakes are inevitably made.” One of those was his prohibition on the importation of European and American products and his closure of the skies over Russia to Western air carriers.


            Such actions, Mitrokhin says, represent “serious steps along the path which Russia passed exactly a century ago.”  Indeed, he argues, “the path to the Russian revolution of February 1917 began in August 1914 not only in connection with the beginning of the war of Russia with its main European partner, Germany,” but also with the response of the tsarist regime economically.


            Drawing on the research of American historian Eric Lohr, Mitrokhin argues that “the beginning of the war marked a radical revision by the Russian government of its former economic and ethnic policy” in the direction of expelling foreigners from positions of strength in the economy and pushing for import substitution.


            That shift led to capital flight, a decline in trade, and a decline in industrial production. Those trends in turn had a negative impact on the military. And when the harvest failed in 1916, the result of bread riots in the cities and revolution.


            Russia today is even more integrated into the world economy than it was and consequently more dependent, Mitrokhin says. Consequently, pursuing an autarchic policy will have negative consequences economically and then politically, consequences that may be beyond the capacity of the Putin regime to cope.


            Had Putin allowed Western sanctions to be imposed without his own response, the impact of the sanctions would have been serious but relatively slow, and the Kremlin leader would have had time to deal with most of them, Mitrokhin says. But having declared a “total” economic confrontation with the West by his own actions, Putin has compounded his problems.


            The Russian economy will decline more quickly and precipitously and massive popular demonstrations against the regime will become more likely, especially if Putin’s response economically or in Ukraine leads to a new round of sanctions by the West.  In some key sectors, Moscow has no good option to prevent disaster.


            What will happen as a result? Mitrokhin asks. “The Europeanized citizens living in Moscow and other major cities who are dissatisfied with the Putin regime” have put up with it as part of a bargain in which the Kremlin has become “a political dictatorship” but they are allowed to work in or for foreign firms, to trade with the West, and to get higher salaries.


            There are “hundreds of thousands” of such people, he says. Moreover, “there are tens of thousands of students who have studied economics, international relations, management and public relations in Moscow and Petersburg [who] dream of finding work” in foreign companies. What could the Russian government offer them if it cuts them off from foreign firms?


            Moreover, their anger and Western actions appear likely to undermine the Russian banking system, something that will create even more havoc in the economy of a kind Putin cannot easily deal with.  How long will such people put up with this? “When will they go out into the streets? In the fall of 2016? Or in February 2017?” the Moscow analyst asks.


            And he suggests that it will more likely be in the latter date when people run out of the potatoes they harvested from these dacha plots during the summer of 2016, yet another echo of the revolutionary events of a century ago.


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