In his recent interview with Walter Russell Mead, Sen. John McCain pointedly mentioned that he used to describe Russia as a gas station masquerading as a country. Now, after revising for accuracy, he describes it as a mafia-run gas station masquerading as a country.
Even in bad times, any good mafia outfit needs to have the muscle to back up its threats and protect it’s turf. To that end, even as sanctions and tumbling oil prices have put the economic squeeze on Russia over the past year and change, Moscow’s defense spending spiked. And Russian defense firms, which are all closely tied to the Kremlin, have made out (quite uncannily) like bandits, as Defense News reports:
Russian defense firms featured in this year’s Defense News Top 100 ranking saw surging revenues as exports reached new highs and the government poured money into defense procurement.
[For exampe,] Russia’s largest defense firm, air defense concern Almaz-Antey, saw revenues rise 10 percent to $9.2 billion, up $883.5 million over 2013. The Tactical Missile Corp., maker of air-to-air systems, saw the most drastic increase with a 48.6 percent rise in revenue to $2.8 billion in 2014.
Other Russian firms that made the ranking were the United Aircraft Corp., which owns Sukhoi, MiG and Irkut, and saw revenues rise 7 percent to $6.2 billion; Russian Helicopters, which finished at $3.96 billion, up 16 percent over 2013; and the United Engine-building Company, which saw a 25 percent increase over 2013 revenues to $3.3 billion in 2014. […]
At the same time, Russian [state] procurement hit a new high, with about 2.5 trillion rubles (US $43.8 billion) spent on new equipment in 2014, according to the head of the State Duma’s Defense Committee, Adm. Vladimir Komoyedov.
Putin’s worldview and his strategy for staying in charge require him to put power and bravado ahead of development and citizens’ interests. Lately, that has meant spending whatever it takes to fund the foreign military adventures and saber-rattling that have proved so useful for maintaining Putin’s popularity, as the model of his previous compact with the people—economic growth in exchange for unquestioned political power, roughly speaking—starts to look obsolete.
But it’s important to take a step back and realize that what Putin is effectively doing: he is essentially making a policy of challenging the two biggest economies in the world—those of the U.S. and China—to an arms race. In the Soviet era, the Kremlin’s obsession with keeping up with the Joneses proved to be its downfall, as technology got exponentially more expensive and the resource export-reliant Russian economy foundered in the decades leading up to the fall of the Berlin Wall. It’s important to remember that it was at least in part Moscow’s abortive attempts to invest in a competitor to Reagan’s highly contentious “Star Wars” program in the ’80s that ended up pounding the final nails in the Soviet coffin.
Even beyond its Soviet legacy, Russia has a history of overspending on defense while ignoring the fundamental health of the economy and the financial interests of its citizens. Vladimir Putin of all people, whose public nostalgia for Soviet days of yore is so much touted, should remember where that leaves his country.