Tuesday,
19 September 2017
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Russia on the brink

Russia has come close the important crossroads in history: the way it is going to move on will determine its fate in the coming decades. Russian political elite and those of the few Russian citizens, whose minds were not burned out by propaganda napalm, perceive the forthcoming resolution of the story quite differently. 

For example, Russian President Vladimir Putin proves his behavior linear during his visit to the annexed Crimea by saying that the subject on Crimea is closed forever. Putin’s finale will be staged either in the Hague Tribunal, or in the Kremlin where he will fall victim to the "palace coup," or elsewhere - due to health-related early retirement. Both Russia and its top authorities have little time left.

On the other hand, Vladimir Yakovlev, founder of the Kommersant newspaper, urges his fellow citizens to temporarily leave the country due to a turmoil soon to come, a new “putsch” [Soviet-style coup d'état] of sorts, able to incite bloody internal conflict. Yuriy Ryzhov, of the Russian Academy of Sciences, recently projected a similar scenario.

It is obvious that the deep systemic crisis caused by Putin’s long-term reign will inevitably lead to the most serious consequences and challenges since 1991.

Many Russian experts claim that the resolution of this story will be much more painful than back in 1991.

The end of the “Putin era” is near, and the image of the Russian Federation may change drastically whenever it’s over. We are witnessing signals sent by Putin’s entourage, suggesting that this end is approaching.

It is extremely important to note that Sergei Ivanov, head of the Russian presidential administration, in his June interview with the Financial Times said that the military assets of NATO and Russia are “incomparable.” We’re talking about an elephant and a pug,” said Ivanov. The main line of the interview, actually, was assuring that the Kremlin believes unleashing war with NATO would be “suicidal.” Many experts interpreted Ivanov’s signal as the willingness of Russia’s political elite (except Putin) to find a way out of this crisis. Ivanov himself is tipped to succeed Putin.

In our opinion, this scenario is possible in case Russia is softly formatted by the international community. This can happen even during Barack Obama’s presidency (before autumn of 2016). The visible part of the iceberg would be Putin’s early resignation, Russia's withdrawal from Donbas, Crimea’s return under Ukrainian control. Russia would also lose part of its territory (Kaliningrad, the Kuril Islands, part of the Far East and Siberia) and be forced to retreat from the North Caucasus. Russian authorities would compensate Ukraine the damage and losses caused by the Russian Federation. The Kremlin would also have to pay over $50 billion in the Yukos case. One of the focal points in this scenario would be Russia's renunciation of weapons of mass destruction (primarily, nuclear weapons) in exchange for the lifting of international sanctions and isolation, new investment programs and the country’s full integration into the global economy.

Another important signal is the approaching resignation of Vladimir Yakunin (head of the state-owned Russian Railways) agreed with Putin, and taking the office of governor of the Kaliningrad region.

It is worth noting that Yakunin is part of Putin's inner circle. His sharp career turn means the beginning of the large-scale staff reshuffle in Russia’s ruling group, mostly due to the almost complete exhaustion of assets for their further syphoning from Russia. Because of sanctions, the financial state of the Russian Railways has deteriorated so sharp, that it reached the point when Vladimir Putin rejected Yakunin’s yet another request for a new support package from the National Welfare Fund. By the way, similar request by Rosneft headed by Igor Sechin was also rejected by the Russian president. It is possible that Putin tries to save his key figures from the major blow, with their gradual transfer to the less primary positions.

Shrinking financial resources and, therefore, a “safety cushion” are also accelerating systemic crisis in Russia. National Welfare Fund is in a difficult condition, with half of its money frozen in illiquid forms while the other part (about RUR 2 trillion) is “laid by for a rainy day.” According to the Higher School of Economics of the Russian Federation, 20 of the country’s 85 regions are on the brink of default. This year, Russia will lose at least 4-5% of its GDP, and even more the next year. For Russia, the international economic situation is catastrophic: the price of oil fell below $50 a barrel with the trend of further drop in the next year or two. The sale of energy resources is bringing less money to the state budget due to the narrowing of external markets.

Many countries, especially the major Western, took a firm line toward the sharp decline in consumption of Russian energy resources. As Iran is expected to pour its oil and gas to the world markets in November-December of this year, and the US – in 2016-2017, Gazprom and Rosneft will be forced to curtail many of their projects and reduce production levels, drastically reducing their influence as the world's major exporters of hydrocarbons. In addition, in September - October of this year, the Russian corporate sector is to pay more than a $100 billion of debt. It is a big question, where to find all this money in Russia’s current harsh reality.

There are many other critical points in the Russian economy, energy sector and social life can still go on, but there is one thing far more important.

Russia has no allies left, who would be ready to support it in a suicidal standoff with the West.

Neither Belarus, nor Kazakhstan, nor China agree to be complicit in Putin’s geopolitical defeat, which has actually already taken place. The longer Putin continues with his aggression against Ukraine, the worse will be the consequences for Russia and its people after Putin's forthcoming fall.

For Ukraine, the moment of the collapse of Putin's authority is very important. But even more important is to have an action plan for the day it happens. It is today when the Ukrainian government, together with the West, must work out a new geopolitical reality for the moment when post-Putin Russia will be transformed. It is today when we must see for ourselves and translate into reality the new Ukraine of the nearest future and form its influence on the neighboring states.

Roman Rukomeda

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