Been Here Before

The economy sucks even with some of the most incredible stashes of natural resources on earth. The only way you have even a semblance of acceptable employment is because your shrinking population keeps the job statistics manageable, but all the growth vectors are going the wrong way.

Your country has been humiliated in global politics. Parts of what was once your great nation, now technically separate countries, are seeking alliances and connectivity with countries and philosophies you spent decades fighting. Military alliances from those former foes are linking to countries all around you. You and your people feel deeply humiliated, ignored by the rest of the world.

But, you’re fiercely proud, have one of the most powerful nuclear arsenals on earth with state-of-the-art missiles, aircraft and ships to deliver them as well as one of the most modern armies on the planet. Your people are looking to you for leadership, and you have carefully isolated, imprisoned or eliminated any political forces that could seriously topple you. Unfortunately, some of those “opponents” carried some pretty heavy sway at the top of the economic ladder, and losing them continues to have a negative impact on economic growth and stability.

So what’s a leader to do? We’ve been here before. Throughout history.  When the economic signs look down, find someone to blame, create a cause célèbre where your greatest power can be showcased. Rattle your sabers, deploy them if you believe you can get away with it… Let the world quiver in fear at “what could happen.” Become the focus of their attention, recapture the power headlines and show your disdain for the agendas of your neighbors and your foes. If you have economic power because of overdependence within those neighbors on your supply of natural resources – particularly their fragile energy needs – let them sweat.

After World War I, when Germany was reeling and humiliated from the imposition of war reparations and further slammed by The Great Depression a few years later, Adolph Hitler began flexing his muscle by sequentially annexing the Sudetenland, Austria and then, the straw that broke the back of the European “appeasers” and sparked WWII, Poland. He had “Jews” to “blame” for his country’s woes. He started his expansionist moves, saw that the rest of the world didn’t really seem to care… and continued.

Today, we have Vladimir Putin, whose post-Crimean invasion popularity within his native Russia was hitting the 80% mark, even as the Russian economy was in shambles and heading south. Putin had his distraction. He has the “liberal” west to blame. Crimea was back as a part of Russia… and the world drilled down on the masked “insurgents” occupying buildings and attacking Ukrainian military installations in mostly-ethnically Russian eastern Ukraine.

Putin seemed to be fomenting the unrest with his own operatives in that sector, then decrying any defensive moves that the Ukraine (seemingly powerless and teetering) might take to defend their sovereign territory as “the government killing or threatening their own people.” Three pro-Russian “protestors” (Ukraine refers to them as “terrorists”) were killed as they assaulted a Ukrainian military installation. Massive Russian forces gathered on the border with this eastern region.

Would Putin invade and annex more Ukrainian land… perhaps the entirety of that nation? “Russian President Vladimir Putin has said he has ‘a right’ to send troops into Ukraine but hopes he will ‘not have to exercise that right.’… Mr Putin said he hoped the crisis would be resolved through dialogue… Talks have opened in Geneva between Russia, Ukraine, the EU and US - the first since unrest erupted in Crimea.

“In his annual live television phone-in, Mr Putin warned the Ukrainian authorities of ‘the abyss they're heading into’ and urged dialogue… He also admitted for the first time that Russian forces had been active in Crimea, which was annexed by Moscow last month. Previously he had insisted that the camouflaged, masked gunmen who took over Crimea were a local ‘self-defence’ force.” BBC.co.uk, April 17th. Will a little more eastern autonomy and recognizing Russian as another official language in Ukraine be enough to stem further aggression?

Russia threatens to cut natural gas supplies (or raise prices significantly) to European powers if they continue to escalate sanctions, and the Russian economy continues to plunge. Yet with this “distraction,” Putin bought time, built power and solidified his domination over any opponents. But for how long? At what point do the people start asking the hard questions about why their economy is sinking so fast? Will the Russian people turn on Putin? Will he escalate his military ambitions to prolong the distraction and lock his power?

Will the US-Russian interim agreement hold? Ukraine’s supposed to be more open and tolerant, and the pro-Russian building occupiers are supposed to give the buildings back. “Under the agreement negotiated in Geneva, the Ukrainian government would grant amnesty to protesters who leave the government buildings they have occupied and agree to give up their arms, unless they are suspected of murder or other capital crimes… International monitors from the Organization of Security and Cooperation in Europe, a 57-nation group that includes Russia, are to play a “leading role” in helping Ukrainians carry out the de-escalation measures.” New York Times, April 17th.  Does Russia really care, or does Mr. Putin see the rising cost of aggression, hearing the economy wolves howling in the background?

“With inflation rising, growth stagnating, the ruble and stock market plunging, and billions in capital fleeing the country for safety, the economy is teetering on the edge of recession, as the country’s minister of economic development acknowledged on [April 16th].

“Mr. Putin, who just lavished $50 billion on the Sochi Olympics, also must now absorb the costs of integrating Crimea, which economists and other experts say has its own sickly economy and expensive infrastructure needs. The economic costs have been masked by recent patriotic fervor but could soon haunt the Kremlin, as prices rise, wages stall and consumer confidence erodes.

 “Even before the Crimean episode, and the resulting imposition of sanctions by the West, Russia’s $2 trillion economy was suffering from stagflation, that toxic mix of stagnant growth and high inflation typically accompanied by a spike in unemployment. In Russia, joblessness remains low, but only because years of population decline have produced a shrunken, inadequate labor force.

“In recent weeks, international and Russian banks have slashed their growth projections for 2014, with the World Bank saying the economy could shrink by 1.8 percent if the West imposes more sanctions over Ukraine. By some accounts, more than $70 billion in capital has fled the country so far this year and the main stock market index fell by 10 percent in March — and a dizzying 3 percent just on [April 15th] over fears of greater Russian involvement in Ukraine.” New York Times, April 16th.

While there is a touch of “revenge joy” watching the Russian economy tank – justice against a malevolent aggressor and supporter of the toxic Syrian Assad regime – bad economies often motivate leaders to take dangerous actions. Does Putin know when or how to stop? Does he know how to play his hand without making a really bad situation worse? And if he misplays that hand, how exactly does the rest of the world react… or suffer? Do missiles launch and troops deploy against this aggressor… or do we swallow hard and accept this power realignment? Is there middle ground that douses the fire… and what is the next confrontation we should expect?

I’m Peter Dekom, and thinking that we (with less global support than we believe) can contain and control a man desperately solidifying his power under very harsh economic times is a very scary assumption.