Under the Tsars, Russian government was "autocracy, mitigated by assassination". Even after the State Duma was established in 1906, there was little restraint upon executive power. After the Bolshevik revolution, the dictatorship of the Communist Party was even less a government of laws. Untrammelled executive power under the psychotic Josef Stalin led to the Terror of the Purges and the creation of the camps described so powerfully by Aleksander Solzhenitsyn. Unlike the efficient German Nazis, few records were kept of the numbers involved, but millions were killed and tens of millions imprisoned under exceptionally harsh conditions.
The 1980s saw an attempt to escape that grim legacy, however the process of liberalisation led to the inevitable demise of a society and a state built on terror. This liberalisation and the fall of the Soviet Union is what Vladimir Putin has already characterised as the greatest "geopolitical catastrophe of the twentieth century". Moreover, Putin is the head of a network of individuals linked together by certain characteristics, of which the most important is a previous membership of the KGB, GRU or other secret organs of the Soviet state, the so-called "Security people", the Siloviki.
The Siloviki has ended the attempt to create a state of laws in Russia. Any interest deemed to be hostile to Kremlin interests, or those of the supporters of the Kremlin, is likely to be subject to arbitrary arrest and legal sanction without due process. Hence the fall of Yukos, whose ownership presumed to trespass upon the interests of Vladimir Putin. The harsh punishment of Khordokovsky, and mysterious death of the British head of the associated Bank Menatep, was an example to others, and also allowed the creation of state corporations under Kremlin control. Senior figures in Russian government- including Putin- were able to take significant stakes in these and to use them as further patronage. Across Russian oil and gas, then minerals and mining, and then other sectors, a network of favoured corporations has grown: Rossneft, Gazprom, Norilsk, Severstal and so on. The rule of the Siloviki is coterminous with the rule of the oligarchs, since they are now very largely the same people.
Within Russia a growing list of sectors have been deemed to be strategic. These now include, not just extractive industries, but land ownership, and now even the trading of grain. This list, like much else in Russia, is rather arbitrary- reflecting the interests of the Siloviki - rather than a concerted strategic plan. However disputes between individuals and groups of Siloviks do occur and this has led to a spate of assassination, including such figures as the Deputy Chairman of the central bank. Public debate has also largely been ended as independent media has been eliminated.
The failure of law within Russia has also meant that Russia has chosen to ignore most international legal agreements. Agreements concerning the creation of BP-TNK, for example are deemed enforceable only as far as BP has the means to physically defend itself- and the legal infrastructure of Russia does not support non-Russians. The Sakhalin-2 agreement was largely abrogated at Russian insistence. Some have argued that these agreements were unfair and that Russia has only been "taking back what is hers anyway". In fact this misses he point, the agreements were not particularly unfair and were freely entered into by Russian parties who still retain ownership interests. The message is clear: Russia does not consider herself bound by any agreement. Any legal agreement can be abrogated at any time and for any reason.
This is why inward investment into Russia is collapsing. The inability to enforce contracts and the absence of rule of law makes it highly problematic and potentially lethal to invest in Russia.
Despite this, the Russian economy has a veneer of prosperity. Since 2003, the price of crude oil has risen steadily. The result has been a transformation in the finances of the Russian Federation. After the domestic debt default of August 1998 (which co-incidentally destroyed the independent banking sector in the country) Russia's state finances have roared back to the point that Russia is now sitting on about $490 billion of reserves. This puts the country about third in the overall level of reserves, behind China and Japan and ahead of Taiwan. However, in sharp contrast to these other countries, Russia faces a significant infrastructure gap. The required investment is probably more than the total reserves by some margin. The Russian balance sheet is liquid, but not particularly strong.
The failure to invest adequately was a significant problem of the planned economy, and ultimately led to the economic breakdown of the Soviet Union. However for the great majority of the years since the fall of the Soviet Union, Russia too has been a net exporter of capital. Russian consumers have a great appetite for luxury foreign brands, and the demand for Russian manufacturing goods has fallen as they can not compete on quality and the high Rouble- the result of the oil boom has meant that they could not compete on price either. The industrial infrastructure of Russia is in a bad way. Less excusably, so is the physical infrastructure- electricity capacity, both generation and especially transmission is on the brink of a major failure, and little has been done to tackle this.
Russia also faces a health and demographic time bomb. Russia has a major IV drug use problem which has contributed to the country now having the largest growth rate in HIV infection in the World- higher than South Africa. This HIV/AID incidence is accompanied by a dramatic increase in multi-drug resistant TB, which is now the highest level in the World. Young men, conscripted into the Russian army have a more than thirty times higher chance of dying than in the British Army- and the British Army is in Afghanistan and Iraq! The brutality of the Russian conscript army is frankly horrifying. This extraordinary combination together with general alcoholism, smoking, poor diet and stress has contributed to a Russian male life expectancy of 54- an African level. The result is that Russia is losing people at a rate never seen in peacetime: over 600,000 a year, with the real prospect of a population fall of one third, from 145 million to 100 million by 2030. The only population generally immune to this fall is, ironically enough, the Chechens- who have large families and don't usually drink.
Despite the glitz of Moscow and St. Petersburg, the reality of infrastructure decay and demographic breakdown makes conditions for the average Russian pretty bleak. The large disparities in wealth is creating the conditions for radical militancy. The Kremlin, of course is well aware of this and has co-opted potential radicals to its quasi-fascist Nashi groups, who have been used to intimidate usually non Russian targets.
Fundamentally, the problem remains that Russia has failed to establish legal security within its borders. As a result, the Kremlin is hardly likely to worry too much when it comes to international law. Even if one accepts, and I do not, the moral equivalence of Kosova and South Ossetia and the Russian occupation of Georgia proper and the NATO bombing of Belgrade- the fact is that troops under Russian command are committing atrocities quite deliberately. The brutality is an act of policy intended to send a wide message. It is also a breach of every international law of war, from the Geneva Conventions to the United Nations Charter.
Occasionally, my friend Edward Lucas and I have asked ourselves what would happen if Russia, instead of threatening its neighbours, offered a friendly face and peaceful solutions. However I am beginning to think that this is to overlook one critical fact: Putin is serious when he says that he intends to restore the geo-political space occupied by the former Soviet Union. He therefore does not recognise any legitimacy in the current democratic governments in the former Soviet Empire. He truly intends- as he says- to restore that geo-strategic space, and he intends to eliminate any Western influence in that space- this includes bringing an end the democratic governments that are integrating or seeking to integrate with the West.
That Russia has legitimate international geo-strategic interests both within and beyond her borders is not in doubt. However, The West can not abandon the Baltic Countries, to which we are linked by friendship and by treaty. Indeed the threat to the Baltic may be be less, simply because it was the occupation of 1940 that insidiously undermined the legitimacy of the Soviet state, as Solzhenitsyn himself noted. The key targets then, after Georgia, are Ukraine and Moldova and the West must consider its strategic options in both these cases. In both, we should be aware that Russia- the lawless state- is likely, as it has done already, to use lawless methods. However it would be both a betrayal of our democratic values and an unwarranted concession to a hostile power to abandon Ukraine to Russian control.
Despite the shock of the violence in Georgia, the fact remains that the challenge of Putin's Russia is not of the same order as that from the Soviet Union- I have highlighted only some of the weaknesses that the Kremlin must face. Furthermore, the likely much weaker global economy has a disproportionate effect on Russia as energy prices fall rapidly. The demographic weakness of Russia is also substantial- there is therefore only a limited window of opportunity for Putin to play his zero-sum game with the wider world. China, in particular is gathering influence, not only in the central Asian states, but in Russia itself, and this too will reduce the freedom of manoeuvre that the Silovik state will have.
Furthermore, the corporate Russian state has increasing business interests beyond its own borders. Thus far the acquisition of international corporations has not been a particular problem. However, it is now clear that Western governments will examine this interests with increasing care. The lawless methods of Russia could be transferred to the West, and it is therefore right that these links should be checked. Nevertheless, the more money that Russia invests overseas, the more hostages she leaves against her own good behaviour. Sooner rather than later, isolation would also create serious problems for Silovik corporate entities.
After the humiliation of the West in Georgia, Putin has shown his hand- but it is one with many weaknesses, and the West can now assess its own strategic interests. A return to a policy of containment and limited isolation does seem the most likely short term policy, but the West understands the nature of the threat. At a time when we can finally begin to see a reduction in the military commitment to Iraq, if not yet in Afghanistan, the military overstretch of the US and UK will be reduced. We are vulnerable- but only for a short period, and permanent bases in the Baltic and the completions of US missile treaties in the region will underline to Russia the limits that the West will accept on Russian adventurism- and where a cold war becomes a hot one. The first priority mu be to unsure the early exit of Russian troops from Georgia proper, and since Russia does not intend to abandon Ossetia or Abhazia, to secure those borders completely.
For those full of hope that Russia too might one day become a democratic and open society, the last few year have been a tragic disappointment. "хотели как лучше, получилось как всегда" [they wanted to do as good as possible, but it turned out like always].
In the face of "like always"- we must respond to the challenge of a hostile, would-be expansionist and generally lawless state. I believe we can meet this challenge and that Silovik lawlessness and brutality can be successfully controlled.