Skip to main content

The "Power Vertical" shifts in Russia

One way analysts have chosen to examine the dysfunctional political system of Russia is as a "power vertical" where closely linked economic and political interests share out the spoils of the economy. Like all models it is a simplification, but it has sometimes explained events that make no other sense. As the Russian forces in Ukraine have increased their hostile activity- the latest being a renewed offensive against Mariupol- there is now increasing evidence that the power vertical is less united than it has been for sometime.

As I noted a few days ago, the campaigning season in Ukraine is getting short, and with only a few weeks left there is great pressure on the Kremlin to break the deadlock before further help can get to the Ukrainian armed forces and the balance of power turns more strongly against the invaders. What is true for the military may also be true for Russia's internal politics. The announcement that Yakunin may be running for the Federation Council seems to be yet another attempt to force the chairman of the Russian Railways from his critical position. Yakunin seems always to have been weaker than his nominal equals, such as Sechin, and this is not the first time that he has faced seemingly irresistible pressure to move. Neither can we be certain that his move is- yet- a demotion. However if the rumours are true, then there is clearly a significant reshuffle in the offing in the next few weeks.

The policies of late Putinism are in ruins: as China adjusts to a new economic situation, the decision by the Kremlin to hitch their political and economic policies to Beijing and to defy the West looks ever less credible. The devaluation of the Renminbi reflects necessary adjustments as China at least pauses for breath, but can hardly have been less welcome to Moscow. Russo-Chinese trade has been devastated by Moscow's own currency troubles, and, for example, the $400 billion Gazprom deal signed only last year in Shanghai now looks like a dead letter. Facing boycott from the West, Russia is having trouble selling gas even at the new highly discounted prices that it must accept from China. In short the malaise that began to grip Russia as the oil price crashed last year is now set for something a lot more painful.

In the face of prolonged weakness in the oil price, Russia is also in the midst of an investment collapse. Not only is new investment not happening, but the exit of capital is now accelerating. Neither can Russia return to the capital market: the country is all but shut out from both credit and investment supply: the limited US financial sanctions have stopped any other country filling the gap, and the result is a near meltdown. Russian reserves are bleeding, and yet the country continues to spend at least 25% of its budget on its armed forces.

The attempt to promote import substitution that might have justified the Kremlin's ban on Western food imports is also not going well. Endemic corruption allowed much produce into the country while simply increasing inflation. The well publicized destruction of over 300 tonnes of food was a PR catastrophe and raised the level of dissenting grumbles to something approaching anger. The sight of Peskov -who nominally earns about $100,000 a year- wearing a 600,000 watch was yet another example of the power elite demonstrating open contempt for the feelings of the Russian people. No one believes the opinion polls showing Putin at new highs in popularity- indeed the higher the level, the more the polls are ridiculed. Anecdotal evidence suggests that support for Putin in such cities as St. Petersburg is in fact almost gone. Certainly overseas, Russian propaganda has utterly failed, and with the exception of three countries, the global reputation of Russia is not merely negative, but is in fact at a new low. Far from rallying support for a resurgent Russia, the regime is now almost totally isolated.

So the problems mount: the Russian economy is shrinking and with Iran returning to the global oil market, and the LNG and Shale markets expanding it may be many years before the price of oil ever recovers. As the price of solar power continues to fall rapidly, there may in fact never be a recovery to the levels that can rescue Russia.

So Putin's renewed attack on Ukraine feels like a last gasp attempt to ride the Russian nationalist tiger. Yet the the Ukrainian army is putting up fierce resistance. The units facing the Russians are largely Russian speaking themselves and as problems mount in the Russian puppet states in eastern Ukraine, the fears of a blow-back of violence into Russia itself grow more concerning. What Illarionov called the Russian civil war in Ukraine may yet still become a civil war inside Russia itself. 

Thus the rumours swirl about a serious attempt to replace Putin and to try to patch up relations with the West. Paul Goble's thoughts on the comments by Piontkovksy have been widely reported. Certainly in many places the power vertical is privately very critical of Putin. However, with the Chechens still on Putin's leash, there is a serious fear that removing Putin might be as dangerous as retaining him. So the regime is caught in a dreadful bind and with no other plan, they still seek military victory in Ukraine.

A military defeat would leave Putin no option but to go by his own will safely or be removed very dangerously.  The Power Vertical is entering a new and different phase.

Comments

Popular posts from this blog

Concert and Blues

Tallinn is full tonight... Big concerts on at the Song field The Weeknd and Bonnie Tyler (!). The place is buzzing and some sixty thousand concert goers have booked every bed for thirty miles around Tallinn. It should be a busy high summer, but it isn´t. Tourism is down sharply overall. Only 70 cruise ships calling this season, versus over 300 before Ukraine. Since no one goes to St Pete, demand has fallen, and of course people think that Estonia is not safe. We are tired. The economy is still under big pressure, and the fall of tourism is a significant part of that. The credit rating for Estonia has been downgraded as the government struggles with spending. The summer has been a little gloomy, and soon the long and slow autumn will drift into the dark of the year. Yesterday I met with more refugees: the usual horrible stories, the usual tears. I try to make myself immune, but I can´t. These people are wounded in spirit, carrying their grief in a terrible cradling. I try to project hop...

One Year On

  Head vabariigi iseseisvuspäeva! Happy Estonian Independence Day! It is one year since I stood outside the Estonian Parliament for the traditional raising of the national flag from Tall Hermann tower. Looking at the young fraternities gathered with their flags, I was very sure that Estonia too would soon be facing the aggression of the criminal Russian regime. A tragic and dark day. 5 eyes intelligence had been clear: an all out invasion was going to happen, and Putin´s goals included- and still include- "restoration" of Russian imperial power across Europe, even to the Atlantic. Yet there was one Western intelligence failure: we all underestimated the guts of the Ukrainian armed forces, the ZSU, and its President and people. One year on, Estonia, and indeed all the front line states against Russia, knows that Ukraine saved us. Estonia used that time to prepare itself, should that "delayed" onslaught ever be unleashed, but equally the determination of Kaja Kallas, ...

A Hard Frost

  After a week of slush and damp, tonight there is a hard frost in Tallinn. The general election campaign has started with the parties submitting their lists of candidates and announcing their programs. The polls seem to show a polarization of views. Although the Liberal Reform party of PM Kaja Kallas is set to remain as the largest party in the 101 seat Riigikogu, the steady rise of the far right EKRE seems to place them firmly in second place, replacing the Social Liberal Centre Party, who seem set to lose several seats. In addition to the Conservative Isamaaliit and the Social Democrat SDE, there is a fair likelihood that a new party will join these in Parliament, namely the Business/Green minded Eesti 200. The Greens and the Libertarian "Right wingers" look like they will struggle to gain seats. A Moderate Reform/SDE/E200 coalition would be a good outcome, but the numbers will have to fall just so, otherwise there remains the chance of another Centre/Isamaa/EKRE coalition...