According to much recent commentary, Russia is back as a major power. The cover of the July 15, 2006 Economist, a magazine noted for its measured tone and sober assessments, featured a photograph of President Vladimir Putin, with a confident air and stern visage, next to the words “Living with a Strong Russia.” New York Times columnist Thomas L. Friedman quipped that “Russia has gone from the sick man of Europe to the boss man.”¹ And in the Holidays (November/December) 2006 issue of The American Interest, Paul Dibb made the case for taking Russia’s return seriously. Russia’s resurgence, we are told, is indisputable; the only question is how to deal with it.

As with almost any broad generalization, this one is not entirely false. Indeed, it cannot be. Russia sprawls across Eurasia, contains 148 million people, possesses more than 3,000 strategic nuclear warheads, is the world’s second-largest exporter of oil and armaments, is the foremost exporter of natural gas, and is a permanent member of the United Nations Security Council. Any country with these attributes will have strategic heft. But a scrutiny of its power reveals that Russia is far weaker than the reigning consensus suggests. Russia is not “back.” If anything, the next few years may show Russia with its back to the wall.

Russia’s Power

Russian power can be assessed in four aspects: military prowess, economic vitality, human capital and “soft power” assets. We take these in turn.

The once mighty Red Army is now a pale imitation of itself, a wheezing symbol of Russia’s deterioration. From a total of three million men under arms toward the end of the Cold War, the Russian armed forces have shrunk to one million. That would be good news were it now a better force. But except for some elite units, most Russian troops are poorly trained and demoralized draftees subjected to pitiless hazing and prone to alcoholism, suicide and corruption. Ninety percent of the males supposedly required to complete the two-year stint of military service evade the draft both legally and illegally. Service contracts signed in 2004 ranged from 17 percent of the recruiting goal in the Moscow region to 45 percent in the North Caucasus.² Less than a fifth of the kontraktniki (those who sign up for the money) re-enlist, complaining of paltry pay and primitive living conditions.³ The problem transcends raw numbers. In 2005 an astonishing 40 percent of draftees were declared unfit to serve on account of physical or mental disabilities. Russia’s weaponry is aging and falling behind qualitatively, and new equipment reaches the armed forces in insufficient numbers. Defense spending has risen 25 percent annually since 2004, but years of neglect ensure that it will be a long time before existing armaments are replaced and soldiers’ morale and quality of life improve. The upswing in hardware expenditure is also mitigated by the 8 percent average inflation rate in 2004–06 and the need to allocate a large chunk of these monies to attract better-qualified people (particularly if plans for a volunteer force are to pan out).

Russia remains a nuclear power, having inherited the Soviet nuclear arsenal, but there have been no dramatic improvements in its capabilities. Russia’s nuclear armory certainly suffices for deterrence, but it cannot thwart smaller yet more urgent threats in its immediate neighborhood, among them terrorism, Islamic radicalism and failing states; nor, as other nuclear powers have found, can nuclear weapons be translated into prosaic political influence. Paradoxically, and unlike during the Cold War, the principal threat now posed by Russia’s nuclear arms is that they, or the fissile materials they require, could end up in terrorists’ hands.

It is undeniable that Russia has begun to recover economically. Unlike the 1990s, a decade of economic contraction and deepening penury, the economy has grown at an average annual rate of over 6 percent since 2001. A middle class of sorts comprising one-fifth of the population has emerged, and Western-style malls, fancy cars and first-class restaurants adorn the big cities, especially Moscow. Consumer demand, fueled by substantial increases in real wages, has boomed. Thanks to stratospheric oil prices, Russia is liquidating its foreign debt ahead of schedule, and its foreign exchange coffers hold nearly $250 billion—a dramatic change for a country once reliant on IMF bailouts.

Yet this economic surge rests on weak foundations because it depends heavily on oil and gas prices. Energy production accounts for about a quarter of industrial output and oil and gas sales provide over half of export earnings. So 6 percent growth rates look less impressive and more fragile, especially if energy prices tumble. The boom has also boosted corruption, which augurs ill for foreign investment. Of the $648.1 billion in foreign direct inflows worldwide in 2004, a mere $11.6 billion went to Russia, most of it to just a handful of regions and the energy sector. Poland attracted more than half the dollar value of FDI that entered Russia that year, while tiny Singapore’s share exceeded Russia’s by $5 billion.⁴ (While FDI in Russia did increase in 2005, the Kremlin’s growing reluctance to engage foreign investors—as, for instance, in the Shtokman offshore gas fields—may soon dampen their interest.) The same pattern appears when one considers the accumulated total of foreign investments worldwide, with Russia’s share accounting for only one percent of it in 2004.⁵

Russia is a member of the G-8, the club of wealthy capitalist democracies, but the logic of its membership is hardly self-evident, for it is neither rich nor democratic. Its economy equals that of the Netherlands in absolute terms, and its $11,000 per capita income is close to Botswana’s $10,500. If “purchasing power parity” rather than exchange rates is used as a measure, Russia’s GDP ranks tenth (just below Brazil’s), but is still considerably smaller than those of the leading Western and Asian states with which it aspires to compete.

Russia placed 13th in a list of fifty countries ranked by the value of their exports in 2005, and that ranking was overwhelmingly due to its energy exports. (Belgium, with a population a tenth as large and a GDP less than half, placed tenth.) More telling was Russia’s share of global exports—2.4 percent, roughly equal to Hong Kong’s. Likewise, Russia accounted for only 1.2 percent of the value of worldwide imports and ranked 23rd, barely ahead of Turkey, Thailand and Malaysia.

Russia’s oil-fired economic boom has not helped market reform or democracy, as Lilia Shevtsova has argued. Part of its expanding and much touted middle class is rooted in the shadow economy or the public sector. (According to a study by the Russian Academy of Sciences, 48 percent of the middle class works in the public sector.) Neither category is proof of successful reform or bespeaks the sort of middle class that can underpin a robust democracy. State control over strategic economic branches has increased under Putin, as have restrictions on foreign investments in the energy sector. Not coincidentally, the tally of government bureaucrats has soared, enlarging the elite constituency opposed to reducing state control over the economy and opening it to globalization. These include segments of the business community, who are often wrongly portrayed as undifferentiated allies of openness, as well as a portion of the middle class nourished by the subterranean economy and the public sector.⁶ Unsurprisingly, Russia fares poorly when ranked against other countries on key measures of globalization. The 2005 annual survey by Foreign Policy magazine and the A.T. Kearney consultancy placed it 52nd in a list of 62 countries—a drop of five places from 2004—and while Russia regained lost ground in the 2006 survey, it still ranked 47th.

These trends illustrate Russia’s transformation into a “petro-state”—a country that organizes its political, economic and social relations around energy extraction and suffers from long-term distortions as a result. The easy money oil and gas sales generate produces bloated state employment rolls, promotes rampant corruption and corrodes public accountability and democracy. Before resigning in frustration in 2005, Andrei Illarionov, who was appointed Putin’s chief economic advisor in 2000, warned repeatedly that these pathologies were obstructing economic reform.

A prime element of any country’s power and potential is the quality of its human capital. Here again, Russia is in poor shape, and while many of these problems can be traced back to the last three decades of the USSR, all have worsened since its collapse.⁷

Russia’s population is declining by some 750,000 annually because of low birth rates and an unusually high death rate for males. According to one projection by the UN Population Division, which generously assumes a net migration into Russia of 7.4 million, its population is expected to fall from the current 148 million to 121 million by 2050. The trend stems from an array of afflictions. Alcohol abuse leads to premature male mortality by promoting cardiovascular disease, suicides, murders, accidents on the road and at the workplace, and poisonings. Drug use, an officialdom in denial, a broken and corrupt heath care system, and paltry spending on prevention and treatment have contributed to the spread of AIDS, a disease that has yet to crest. Tuberculosis and diphtheria are also widespread. As recently as 2003, Russia was the sole European country in a World Health Organization (WHO) list of countries with the highest rates of tuberculosis per 100,000 of the population. A particularly poignant aspect of Russia’s deteriorating human capital is the high suicide rate, especially among males. According to WHO data on 46 countries between 1998 and 2003, Russia topped the list, with 71 cases per 100,000 of the male population.

The net result of disease, suicide and a fertility rate well below net replacement is that Russia’s aging population will make even larger claims on revenues, strain the health system, erode the tax base, undercut productivity, and reduce monies available to promote innovation in science and technology. Six people of working age (15–64 years) supported each Russian over 65 in 1995. The UN Population Division expects the ratio to slip to two to one by 2010.

No less problematic is Russia’s continued incapacity to produce and retain the talent needed to compete with both advanced industrial societies and dynamic emerging market economies. Russia’s educational system went into a tailspin after 1991, as investments declined and buildings, libraries, salaries, laboratory equipment and textbooks were neglected. (Not surprisingly, Russia’s wealthy and well-connected now prefer to send their children to foreign universities.) Many of Russia’s famed state-funded research institutes were hard hit, and more than half a million scientists and computer programmers emigrated between 1991 and 2002. Some reforms have been initiated in recent years and funding has been increased, but the educational system has a long and difficult road ahead if it is to serve as the wellspring for a vibrant economy.

Russia’s soft power, too, is slight and slipping. Its culture is old, exceptionally rich and world-renowned, but nothing that has occurred in the past 15 years has made it more attractive. Russia’s cultural appeal may be diminishing, as evidenced by the declining use of and interest in the Russian language—especially in the other post-Soviet states (not to mention in Western universities), where non-Russian languages are experiencing a revival and English is considered the wave of the future. The roughly 26 million Russians and Russian-speakers in the country’s “near abroad” remain eager consumers of Russian media, but their local clout is confined to regions such as the Crimea, the Donbass, Transdnistria and northern Kazakhstan.

Meanwhile, Putin’s brand of authoritarianism appeals to some extremists in the non-Russian states, while annoying or rattling many ordinary non-Russians, and even many Russian-speakers, too. Abuses in Chechnya, saber rattling against Georgia, a wave of hate crimes and the regular assassinations of bankers and journalists complete the increasingly unattractive picture. While the United States, Europe, South Korea, India, and China offer political and economic models that inspire others, Russia does not.

Russia’s Strengths

Of course, Russia does have strengths. One—strong leadership—is overplayed; the other—energy resources—is formidable. Again, we take them in turn.

In contrast to Boris Yeltsin, whose drunkenness and buffoonery made Russians wince, President Putin is sober, fit and knowledgeable. He does not tolerate American lectures on democracy, and he has delivered order—especially by taming the oligarchs, whom many Russians regard as thieves. Yukos CEO Mikhail Khodorkovsky was imprisoned after a kangaroo-court trial; some oligarchs went into exile; most assumed a low profile and thereby retained their enormous assets. Power has been centralized in Putin’s hands, and Russia’s wayward regions have been brought to heel. There is even talk of and much public support for keeping Putin in power after his second term ends, when the constitution requires that he step down as president. The 2008 presidential elections will lead Putin either to change the constitution, to look for a figurehead strongman he controls from off-stage, or to remain in control as prime minister with vastly expanded powers.

The strength exuded by the Putin regime is illusory, however. Putin and his many supporters wrongly believe that a domineering leader who ensures order is better than governance through institutions embedded in law and subject to countervailing forces. Putin inherited frail institutions from Yeltsin, but he has made them weaker still. Accelerating a trend that began under Yeltsin, Putin has also promoted members of the secret police, the military, and various other security services to prominent positions. While itself riven by factionalism, this military-security complex shares an instinctive antipathy for democratic norms. In such polities, the lack of accountability invariably permits social problems to fester while officeholders and the powerful take bribes and steal with abandon.

Russia’s natural resources—especially its fossil fuels—unquestionably provide enormous leverage. Gazprom, the opaque and deeply corrupt state-controlled gas giant, controls Russia’s natural gas reserves, which, at nearly 1,700 trillion cubic feet, are the world’s largest, accounting for 28 percent of global reserves. As a critical supplier throughout Europe and the former Soviet republics, it has become the Kremlin’s foreign policy tool. Russia’s attempts to squeeze its neighbors, to gain control of their pipelines, and to establish a long-term presence in downstream markets in Europe conjure up an unstoppable juggernaut, but four conditions temper this particular weapon’s effectiveness.

First, Russian oil and gas production may have peaked, and unless substantial investments are made in the near term, may even decline. Russia’s pipeline network, too, is decrepit and must be modernized. State-run energy monopolies such as Gazprom, whose raison d’être is rent seeking, rarely invest sufficiently in their operations; the same applies to the oil pipeline monopoly, Transneft. The upshot is that corruption and the lack of transparency threaten to erode the value of Russia’s most important source of revenue and political influence.

Second, Russian oil and gas must pass through pipelines controlled, at least to some degree, by non-Russian states, particularly Ukraine. As long as its neighbors retain this leverage, Russia’s capacity to blackmail them will be balanced by their capacity to blackmail it, as the tumultuous energy relations between Russia and Ukraine illustrate. While Russia plans to build new pipelines that skirt its neighbors, most of its energy will continue to traverse their territories for many years.

Third, continued Russian energy pressure is inducing its neighbors to reduce dependence on Russia. Turkmenistan and Kazakhstan are seeking to export their oil and gas across the Black Sea, the Caspian Sea and through China and Iran. Azerbaijan already exports oil via the Baku-Ceyhan pipeline. Ukraine has built the Odessa-Brody pipeline and hopes to extend it to Plock. Georgia is slated to get a significant proportion of its natural gas needs—now overwhelming supplied by Russia—in exchange for serving as the passageway for the Baku-Erzurum pipeline linking Azerbaijan with Turkey.

Fourth, Russia’s flexing of its energy muscles is alienating its nearest neighbors. Many were disposed to regard Russia as benign. They mourned the demise of the Soviet Union and felt ambivalent about their own new nations. Now Russian policy is forcing them to reconsider that outlook. Non-Russian ruling elites could increasingly play the anti-Russian card, both to increase their own legitimacy and to counter Russia’s hegemonic pretensions. Russian energy hardball may create exactly what it was supposed to avert: the rise of non-Russian nationalists committed to state sovereignty and separate paths of development.

Energy does provide Russia a formidable source of influence, but when seen alongside the deficit in other forms of leverage, it makes Russia a one-dimensional power. The more westward flows of hydrocarbons fill Russia’s coffers, the more vulnerable Russia becomes to steps skittish consumers take to reduce dependence through more efficient use or by seeking alternative suppliers.

Russia’s Influence

Although Russia’s immediate neighbors will always live under its shadow, a closer look shows that its influence has declined and in some cases has become a mixed blessing. In Central Asia, Moscow faces potential quagmires. Its closest allies, Kyrgyzstan, Tajikistan and Uzbekistan, are poor and vulnerable to upheaval. The drug trade, organized crime, militant Islam, poverty, repression, corruption, and ethnic and regional conflict are either manifest or rumble beneath the surface. Turkmenistan grudgingly exports its gas through Russian pipelines, but its late president, Saparmurad Niyazov, persistently viewed Russian-led regional organizations such as the Commonwealth of Independent States as threats to his own iron-fisted rule. His successors are likely to adopt a similar view. With a gargantuan border with Russia and its population one-third Russian, Kazakhstan must remain mindful of Russia’s interests. But the growing presence of Western, Japanese and Chinese corporations and political forces shows that Russia can no longer call all the shots.

Armenia is arguably Russia’s most loyal ally, but with the Nagorno-Karabakh conflict with increasingly prosperous Azerbaijan still simmering, and with few economic resources, it is a dubious strategic prize. Its value will diminish as the balance of power shifts toward energy-rich Azerbaijan, which no longer needs to kowtow to Russia, thanks to Turkey’s support and expanded economic ties with the West. As their patron, Russia has tremendous sway with Georgia’s two breakaway republics, Abkhazia and South Ossetia. But the Kremlin’s underwriting of these secessionist statelets has, as continuing Russian-Georgian squabbles show, only deepened Georgians’ anti-Russian sentiment and determination to join NATO. Furthermore, the fragmentation of Georgia and the emergence of an Abkhaz or South Ossetian state could render the North Caucasus, a region already soaked in violence, so unstable as to upset the precarious equilibrium of the South Caucasus. A critical stretch of Russia’s own southern flank would then become even more unstable.

Russia’s influence in the western parts of the ex-Soviet world is no less tenuous. Moldova’s Communist-ruled government has turned against Russia because of Moscow’s continued support of the backward, breakaway Transdnistria region, itself a dubious asset. Belarus’ dictatorial president, Alexander Lukashenko, talks of union with Russia, but his despotism and Soviet-style political-economic system make Russians understandably wary of his embrace.

Russia’s relations with Ukraine may best illustrate its declining power in relation to its neighbors. Russia’s ham-handed intervention in Ukraine’s 2004 elections contributed to the Orange Revolution. The gas war that erupted between Russia and Ukraine in early 2006 only made things worse, as Ukrainians resented what they saw as energy blackmail—during a bitterly cold winter at that. Even Ukrainian Prime Minister Viktor Yanukovych, Russia’s favorite son in 2004, has tempered his pro-Russian position of two years ago, perhaps realizing that being seen as Moscow’s man is no way to build broad-based support and legitimacy in a country divided over what constitutes the best relationship with Russia. Given geopolitical realities, Kiev will attempt to maintain good relations with Europe, the United States, and Russia—unless Russia forces its hand with a brazen power play.

Things are little better in Russia’s east. Moscow and Beijing are strategic partners for now, given their mutual antipathy for a U.S.-dominated unipolar world and anger at American harangues about human rights. But the partnership will wither if predictions of China’s becoming the next superpower prove accurate. Russia, which has a long border with China and fewer than seven million people in its vast and resource-rich Far Eastern region, will then have to live under China’s shadow, implicitly relying on America, Japan and India as counterweights. China has already become a pivotal power in Central Asia, where its cooperation with Russia is symbolized by the Shanghai Cooperation Organization. Although it is a Moscow-Beijing-led organization devoted to balancing the American presence and combating terrorism and radical Islam, it has effectively codified, institutionalized and legitimized China’s growing influence in a region historically dominated by Russia. Once the common interest in balancing the United States evaporates and China becomes a front-line power, Chinese clout in Central Asia could surpass Russia’s.

A Balance Sheet

Russia’s recovery is undeniable, but far less substantial than prevailing wisdom avers. What has changed is that Putin looks strong and energy prices have increased, thereby providing Russian elites with money and the confidence to talk tough. Having dismantled democracy, Putin needs another form of popular appeal. He has found it in the language of Great Russian power, which resonates in Russia these days, not least because of the strong undertow of chauvinism and xenophobia. Putin has played on great-power and imperial nostalgia, nationalism and patriotism, vowing to rebuild a strong and glorious Russia. Russian elites of various political persuasions have either adopted Putin’s great-power talk or sympathize with it. But such rhetoric—what Dibb calls “Russia’s will to power”—has not made Russia strong. Indeed, history shows that “talking loudly while carrying a small stick” can push states to overreach, producing upheaval at home and abroad.

For its part, the West will have to live with a Russian petro-state that is weak, loud and potentially unstable. The appropriate policy for America is to build cooperation in areas where its interests intersect with Russia’s, be clear about areas where its interest do not intersect, and do what is feasible to minimize the external consequences of Russian instability—especially in Russia’s neighbors. The challenge for the United States will not be that Russia is too strong to handle, but that it is too weak to make a reliable partner.

1.
New York Times, October 25, 2006.
2.
International Institute for Strategic Studies, Military Balance, 2005-2006 (Routledge, 2005), p. 151.
3.
Nezavisimaya Gazeta, August 24, 2006.
4.
Harry G. Broadman and Francesa Recantini, Where Has All the Foreign Direct Investment Gone in Russia? (World Bank, January 2003).
5.
“Country Fact Sheet: Russian Federation”, United Nations Conference on Trade and Development, World Investment Report, 2005.
6.
Pyotr Bavin, “Ozhidanii srednego klassa” (“Anticipating the Middle Class”), Sotsial’naya real’nost (Social Reality), part 1, no. 1 (2006); part 2, no. 3 (2006).
7.
For an excellent survey, see Harley Balzer, “Demography and Democracy in Russia: Human Capital Challenges to Democratic Consolidation”, Demokratizatsiya (Winter 2003).