Russia ends 2017 still trying to hide the damage done by over three years of low oil prices and sanctions. There are certain indicators that cannot be completely concealed. One is the number of rubles it takes to buy a dollar (the benchmark for buying foreign goods or services.) After the Soviet Union dissolved most of the 1990s were spent with the new Russian economy getting used to the real world. By the late 1990s the Russian currency had reached a realistic value versus the dollar (about 30 rubles per). It is currently 60 rubles per dollar. In 2016 it hit 80 rubles to buy a dollar. All because of low oil prices and sanctions. More sanctions are coming in 2018 as the U.S. unilaterally sanctions about a hundred Russian business and government officials for their role in various illegal activities. While the travel and banking sanctions applied to these people is a minor inconvenience, being named and having your misdeeds explained is embarrassing and could cause long-term problems.
Meanwhile the government spent a lot of money to get a more favorable exchange rate but that uses up a lot of foreign reserves. As the ruble loses value versus the dollar and other foreign currencies imported goods become noticeably more expensive and there is a lot of essential stuff Russian can still import, if they can afford it. Meanwhile Russian citizens are less able to afford overseas vacations and those that do go find that Russians are not as welcome as they used to be. Russian airlines have seen foreign traffic decline as foreign passengers switching to non-Russian airlines when travelling into and out of Russia.
Since 2013 GDP dropped from $2.1 trillion to about half that as and the ruble lost about half its value compared to the dollar (the currency of international trade). Russia dropped from being the sixth largest economy in the world to the 14th.
Russian banks are a good example of
what is happening because
they are increasingly insolvent.
The government tries to hide that but foreign financial institutions like the World Bank and IMF, with experience measuring situations like this know better. Thus Russian claims to current and future GDP growth are exposed as deceptions based on accounting tricks and don’t really conceal unresolved and worsening problems. Reality is the shrinking defense budget and spending on needed infrastructure maintenance and construction.
The two main sources of capital (cash to work with) was oil income and access to investment or loans from foreign (usually Western) sources (
banks). Those two sources are gone and
now Russia has to seek loans from nations it really does not want to become indebted to, like China. In part that is because China is very strict when it comes to business and loans. This is the case even when there is a diplomatic or political angle involved. China will charge you market rates (of interest, much higher for worse risks like Russia or Venezuela) and cut you off if your financial situation is considered desperate. Russia does not want to risk the judgement of Chinese lenders. But Russia is running out of money, credit and options. Grabbing more of Ukraine won’t help because Crimea turned out to be a lot more expensive than expected and the subsidies to the half of Donbas they have already taken (or, rather, their mercenaries and hired rebels have taken) is a drain on the shrinking economy. The costs of Crimea are even worse.
The government has managed to convince most Russians that the economic situation is not as bad as it really is and put the blame on foreigners, especially the Americans. At least that’s what the latest opinion polls show. State control of the mass media and constant propaganda does still work, just not as well as before the Internet came along.
Russia has about 5,000 military and contractor personnel in Syria providing the Assads with air, intel and logistical support. This plays a major role in keeping the Syrian army and air force operational, if nothing else. Russia has lost about 40 military personnel plus about twice as many Russian military contractors (usually working for the Wagner Group). The Russian losses, both military and contractor, are reported or discussed in the Russian language Internet and the government apparently does not interfere with that as long as the Internet chatter is about morning the departed, not criticizing the government or its foreign policy.
It is unclear what Russia hopes to gain in Syria although Russia recently claimed that only Russian firms would get the lucrative contracts to rebuild Syrian oil and natural gas fields. These are not extensive but letting the Russians have all the reconstruction work makes sense as it is still unclear what kind of final peace arrangements will be arranged for Syria.
And then there are the Russian allies; Turkey and Iran. These two countries are their traditional enemies of Russia, while Israel and the Gulf Arabs are not. What to do? Israel and Russia are trying to negotiate a deal to prevent a war between Iran and Israel over Iranian plans (already announced and underway) to establish bases in Syria and organize anti-Israeli forces. Thus for Israel any long term Iranian presence in Syria is intolerable. Russia says it can work out such a deal but many Israelis are skeptical and Iran says such a deal is not possible. When it comes to opposing Iran Israel has some very public backing from Russia despite the fact that this puts Russia at odds with their two other allies (Turkey and Iran) in Syria. The Russians see the Israelis as a more powerful and reliable ally than the Turks or Iranians. Russia is also backing the Kurds in Syria and that is causing problems with Turkey.
The Israelis keep pointing out that Iran and their dependency Syria have, since the 1980s, openly called for the destruction of Israel. Many Westerners saw this as absurd while Russia sees it as an opportunity and the Israelis point out that they have nukes, the most effective military (and economy) in the region and no tolerance for more Iranian forces moving into Syria or agreeing that the Assads are a legitimate government. For Russia this is a challenge since as outsiders they realize that Israel is right and long-term a more dependable and desirable ally. But the current Russian government is getting by on uncertainty, deception and hope that something will work.
While Russian and Turkish officials have privately disapproved of Iranian plans to establish more direct control in Syria and Lebanon the U.S. and most European nations openly object to this Iranian strategy. France has been particularly opposed to the Iranian plans, in part because France has itself been involved in what is now Syria and Lebanon (the “Levant”) for nearly a thousand years. Over the last century Islamic radicals in the region have been more energetically trying to drive all non-Moslems out.
Russia is using the crowded Syrian airspace to see how well their new Su-35 fighter can maneuver against and detect American F-22 stealth fighters. This works both ways but the Russians are under more pressure because their Su-35 is the best Russia has got and it is basically just the most advanced model of the Cold War era Su-27/30. It is similar, and probably inferior, to proposed F-15C upgrades. The F-15 was what the Su-27 was designed to match and it never quite did. The proposed F-15 upgrades never happened because the F-35 entered service and Israel is the first foreign user to declare their F-35s operational. The F-35 incorporates a lot of F-22 technology plus some even more advanced tech and the Russians have a rare opportunity to get their best in the air with the American best. No matter the real outcome of these confrontations Russia can spin the incidents to make the Americans look bad. As a bonus these confrontations are part of an effort to interfere with American air operations east of the Euphrates River. Russia and the United States agreed that this river in eastern Syria would serve to define the “deconflicition zone” boundary that neither nation would cross except by prior agreement. Yet Russia has been violating that agreement several times a day as their aircraft “accidentally” wanders across the river or chases American warplanes back to where they belong. Russia insists that it is the Americans who are deliberately crossing the line and being chased away by Russian aircraft. This sort of thing was a favorite Russian tactic during the Cold War, at least until American fired back (sometimes literally). That led to binding treaties and the incidents disappeared. That’s what happened in late 2015 when Turkish F-16s shot down a Russia fighter-bomber that entered Turkish air space despite multiple warnings to not do so. Russia still denies they were at fault but there were no more “navigation errors” involving Russian warplanes and the Turkish border. In general Russia is doing what it can to persuade the Americans to get out of Syria and the “navigation errors” are part of the playbook. Other persuasions include declarations of victory in Syria and holding peace conferences with the Assads and trusted foreign allies to make it look real.
Russia also used Syria as an opportunity to give many of its most promising officers some combat experience. Not all succeeded (and were usually quietly replaced and sidelined back home). Those who did well went back to Russia and were promoted while being given key commands. Russia is continuing to use Syria in this manner because it works.
For Russia their Syrian intervention was largely to help the Russian defense industries get more export sales. This angle is much praised by state-controlled media inside Russia. Outside Russia the “combat experience” of new Russian weapons in Syria has definitely helped sales. At the same time that combat experience has been noted and analyzed by Israeli and Western intel agencies as well as military equipment developers in those countries. Their conclusion is that the new Russian gear is no real competition for Western stuff but not useless, at least against poorly armed rebels and Islamic terrorists. The Syrian experience also makes it easier to sell new Russian weapons systems that are still in development and won’t have a chance to get “combat experience.” This is especially true of some new armored vehicles, like the revolutionary T-14 and the latest version of the T-90 (a much improved T-72 renamed to make it sound better than that). The successful combat experience of Russian weapons in Syria also makes it easier for Russia to interest foreign customers in tech that is still developments. This includes their own version of the F-22; the much delayed Su-57. This aircraft is now expected to enter service in the mid-2020s once the promised engines and high-tech sensors can be made to work as promised and do it reliably.
The latest ceasefire agreement has managed to keep the front lines stable since it began in August. Russia has a stalemate in Ukraine and no indication that Russia is willing or able to revive the offensive. St the same time Russia is trying to repair some of the economic links that were severed after the 2o14 Russian invasion began. American military had has become more active. Still no weapons, but lots of useful support equipment, especial EW (Electronic Warfare) gear. American advisors admit that they are learning a lot from the Ukrainians who quickly mobilized and halted the Russian advance. Both Russia and the Americans are trying out new weapons, equipment and concepts in Donbas and U.S. believes they are learning much from the experience. The Ukrainians believe the Americans will show their appreciation by not suddenly abandoning Ukraine. All non-Russians in Eastern Europe remember what has happened in the last century as people like the Ukrainians got free of Russian rule several times only to be brutally reconquered because the West was not willing to help.
This time around Ukraine has much to officer, including another ally with a Black Sea coastline and a keen insight on Russian naval capabilities. Ukraine was long the home of major Russian ship building operations. Ukrainian (and Russian) shipbuilding experts currently agree that all Russia can afford is to build coastguard type ships plus a few dozen nuclear subs capable to operating far from shore. No more aircraft carriers or sea-going destroyers. The money is not there and neither is the Ukrainian ship building facilities (outside of Crimea). Meanwhile the U.S. Navy has been a regular presence in the Black Sea, and Ukrainian ports. American warplanes and surveillance aircraft operate regularly over the Black Sea and the Russians try to interfere. That makes for exciting headlines and often dangerous and stressful training for all concerned.
Russia agreed to strictly enforce the latest round of sanctions on North Korea, including the ones aimed at North Korean use of Russian and Chinese banks to avoid detection by sanction investigators. But “strictly” has a different meaning in Russia. Al so consider the degree of corruption in Russia (compared to China, which is cracking down on corruption more effectively). As a result North Korea has found ways to continue doing business via Russia. So far Russia, and foreign observers, have been reporting some of the failed North Korean attempts to continue doing business via Russia. The problem is the North Koreans keep trying despite getting caught. This may be due to the fact that Russia is the only neighbor where North Korea has any chance at all of rebuilding smuggling networks. The Russian government tolerates this as long as their Chinese counterparts do not openly object. Russia also continues employing North Korean workers under contracts that turn the North Korean workers into a form of slave labor. North Korea needs the hard currency and the North Korean workers, despite contracts that give the North Korea most of their pay (which is cheaper than any other foreign workers in the Russian Far East) it is considered a desirable arrangement since they can send some money to their families and the working conditions (food and utilities like heat and electricity) are much better than in North Korea.
In addition Russia recently (December 5th) signed an extradition and prisoner exchange deal which allows prisoners choose serving out their sentences in their home country. While few North Koreans would want to transfer to a North Korean prison, Russians would definitely want to get to a Russian jail. More importantly is the quick extradition provisions of this deal enabling either country to quickly get criminals arrested and sent back. Russia earns additional good will from North Korea by criticizing the Americans for not offering to negotiate with North Korea and admit North Korea has real grievances. This the same propaganda Russia has been putting out since the late 1940s. It has never done North Korea much good but for the North Korean rulers (put in power by Russia after World War II and ordered to invade South Korea in 1950) it is appreciated.
Cold War II
Another reason for Russian tolerance for North Korea and hostility towards the U.S. has to do with matters that are only distantly related to the North Korea situation. Russia is basically back in its Cold War state of mind and not happy with the Americans calling them out on violations of Cold War era arms reductions treaties (like the 1987 INF, intermediate-range nuclear forces) which were welcomed by just about everyone. But the U.S. has imposed sanctions on Russia for its new (since 2014) ground based 9M729 Kalibr cruise missile. Ground based missiles capable of carrying a nuclear warhead and with ranges larger than 500 kilometers and less than 5,500 kilometers were forbidden.
Russia is also at risk for the same reasons and appears to be following the Chinese lead in dealing with North Korea. Russia is at lesser risk because of a shorter border and not many people on the Russian side to begin with. Russia is more concerned about not offending China and really cares little about what happens in North Korea.
December 17, 2017: In a rare public gesture the Russian president publicly thanked the Americans for sharing information on Russian ISIL members who were back from Syria and Iraq and planning attacks. Russian police arrested several ISIL members before they could carry out an attack on a cathedral in St Petersburg yesterday. There has been a notable increase in raids on ISIL hideouts in Russia over the last few weeks.
While the official Russian line is that the U.S. is aiding ISIL to escape Syria the reality is that the Americans have developed a much better database of Islamic terrorists in the Middle East and elsewhere, along with software to analyze and predict what the Islamic terrorists will do (or go) next. The U.S. is willing to share with whoever will do the same and Russia has long been one of those partners. While Russian propaganda (to keep Iran and Turkey happy) supports a favorite myth in the Moslem world that Islamic terrorism, especially groups like ISIL are all controlled by the CIA and Israel, which created these groups to make Islam look bad. The reality is that Russia has admitted thousands of its citizens (mostly Moslems from the Caucasus, especially Chechnya). Often the details of (and announcements of) these intelligence sharing agreements are kept quiet to prevent the Islamic terrorists from learning something that could help them avoid detection. Russia knew it was vulnerable if a lot of those Russian Islamic terrorists came home and now they are doing so and the Americans are providing good intel on who, when and where. This has apparently prevented a number of attacks inside Russia and the public praise for the intel sharing deal is usually a sign that the arrangement will be used heavily for some time to come.
The Americans have an edge in Middle East terrorist tracking because they have been heavily involved with that since 2001, developed some useful new technologies and collaborated with Israel a lot and now is getting more cooperation from Arab states (especially Saudi Arabia and North African states) who have long been the source of most Islamic terrorists for decades. Russian troops have identified a lot of its own citizens in Syria since Russia intervened in late 2015. But to find out what these Russian terrorists planned to do after Syria more information was needed.
December 11, 2017: Russian leaders announced that the withdrawal of Russian forces in Syria was beginning. Some warplanes and their ground crews will be gone by the end of the year and most of the troop reductions will take place by mid-2018. At least half the Russian forces are expected to remain, including about 1,200 military contractors from the Wagner Group. Russia will concentrate on its new naval base and air base in western Syria. The naval base will be able to handle about ten large warships at a time, including nuclear powered ones. The U.S. has noted that Russian ground troops, including special operations ones and contractors, are deliberately avoiding ISIL forces as long as those Islamic terrorists leave the Russians alone and appear to be heading for a border and leaving Syria. The Americans believe there are still about 2,000 ISIL fighters in Syria, scattered throughout the country, many of them seeking to leave.
November 30, 2017: In Afghanistan
(Logar province) Afghan police arrested eleven Russian Islamic terrorists. Actually the prisoners included some women and children and all were Chechens travelling in a truck and a motorcycle. Weapons and ammo were seized. The Chechens were travelling from nearby Nangarhar province, which borders Pakistan.
China announced that they would conduct a joint anti-missile defense drill with Russia on December 11-16. The joint drill will use computer simulations and take place in China (which now leads the world in the number of supercomputers in service). The drill is to coordinate a response against a ballistic missile attack against either country from any direction.
November 28, 2017: The Russian space program suffered another setback when a Russian Soyuz 2.1 satellite launcher again failed to put it valuable cargo into orbit. This failure was traced to a software error in the “fregat” third stage. The control software for fregat was programmed for launch from the Balkinor launch facility but the failed launch was from the new Vostochny space center. If fact, this was only second launch from Vostochny, which became operational in 2016 and is now the center of another embarrassing and expensive failure. The government is conducting an investigation but the basic problem is well known; too little money and not enough available talent to make the space program work as well as it did in the past.
November 25, 2017: Iranian, Russian and Turkish leaders met in southern Russia (Sochi) to work out how the three nations will continue to cooperate in Syria. More of these meetings will be held and will become more contentious as Iran carries out its plan to take complete control of Syria.
November 22, 2017: Russia has shut down the UN investigation into violations of the 2013 deal Russia negotiated with the Assads to get rid of Syrian chemical weapons. Russia used its UN veto twice in the last week to prevent continued UN investigation of the violations of that agreement. Russia apparently concluded that UN investigators were getting too close. This became obvious when the UN investigators released another report a month ago on continued chemical weapons use in Syria. The report confirmed that the Assad government used nerve gas against a pro-rebel village in Idlib province during April 2017, an attack that killed over 83 (30 of them children) and left over 300 with nerve gas related injuries. This is a war crime that many UN members are demanding be prosecuted. As expected the Assads denied the charges safe in the knowledge that their ally Russia would use their veto to block any major war crimes prosecution. The UN investigators had concluded early on that the April attack used nerve gas but the latest report confirms that the nerve gas was delivered by the Assad forces. Another part of this report confirmed that ISIL used mustard gas in several September 2016 attacks.