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For Putin, economic and political reality dampen appetite for arms race


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For Putin, economic and political reality dampen appetite for arms race

By Andrew Osborn

 

2019-02-07T152449Z_1_LYNXNPEF1615U_RTROPTP_4_RUSSIA-PUTIN.JPG

Russian President Vladimir Putin attends a business forum Delovaya Rossiya in Moscow, Russia February 6, 2019. Alexander Zemlianichenko/Pool via REUTERS

 

MOSCOW (Reuters) - With his ratings down and state funds needed to hedge against new Western sanctions and raise living standards, Russian President Vladimir Putin cannot afford to get sucked into a costly nuclear arms race with the United States.

 

Alleging Russian violations, Washington said this month it was suspending its obligations under the Intermediate-range Nuclear Forces Treaty (INF) and starting the process of quitting it, untying its hands to develop new missiles.

 

That raises the prospect of a new arms race between Washington and Moscow, which denies flouting the treaty. Putin responded by saying Russia would mirror the U.S. moves by suspending its own obligations and quitting the pact.

 

But Putin, who has sometimes used bellicose rhetoric to talk up Russia's standoff with the West and to rally Russians round the flag, did not up the ante.

 

He did not announce new missile deployments, said money for new systems must come from existing budget funds and declared that Moscow would not deploy new land-based missiles in Europe or elsewhere unless Washington did so first.

 

"...We must not and will not let ourselves be drawn into an expensive arms race," Putin told Defence Minister Sergei Shoigu.

 

His statement was borne of necessity.

 

Harsh economic and political realities and memories of how the cost of the Cold War arms race contributed to the Soviet Union's demise means Putin's options are limited, a situation that may curb his appetite for expensive escalation in future.

 

That does not mean Putin is not still spending heavily on the military. He unveiled an array of new weapons last year which he billed as world-beating, including a hypersonic missile, a laser weapon, an underwater nuclear drone and a nuclear-powered cruise missile.

 

But his ability to bankroll a full-on arms race is limited.

 

"We need to keep in mind that the question of an arms race that could cut us into pieces is entirely realistic," Sergei Dubinin, former governor of Russia's central bank, told Russia's RBC TV channel before Washington announced its exit.

 

He said the United States was trying to repeat its successful Cold War strategy of pushing Moscow into an arms race it could not afford and that Russia would be ill-advised to try to attain parity and needed a smart response instead.

 

Memories of empty supermarket shelves in the run-up to the 1991 Soviet collapse still haunt many older Russians as the then Soviet Union directed huge cash flows to the military-industrial complex to try to keep up with the United States while neglecting the consumer economy.

 

"They (the Americans) recall that the Soviet Union collapsed in part because it tried to keep up with the United States when it came to who produced more missiles, nuclear submarines and tanks," Viktor Litovkin, a military expert, told the Russian army's Zvezda TV channel.

 

"They are trying to do the same thing today."

 

COUNTING THE COSTS

With the INF treaty suspended, Washington and Moscow have said they will develop previously prohibited short- and intermediate-range land-based missiles, with Russia saying it wants them ready by 2021.

 

Shoigu told Putin the money to develop two new land-based missile launchers would come from this year's budget by reallocating existing funds.

 

Russia does not disclose the full extent of its military and national security spending, but says it will account for around 30 percent of its 18-trillion-rouble ($273-billion) budget this year.

 

Oil revenues mean Russia is not short of money. Its budget surplus this year is projected to be 1.932 trillion roubles (22.6 billion pounds) or 1.8 percent of gross domestic product. Russia's foreign exchange reserves stand at $478 billion, the fifth largest in the world.

 

But the money is already allocated in a way dictated by Moscow's difficult geopolitical situation and by Putin's own increasingly tricky domestic political landscape. Reallocating the money would be painful.

 

Moscow is hoarding cash to try to give itself a $200-billion buffer against new Western sanctions and is embarking on a multi-billion dollar spending push to try to overhaul the country's creaky infrastructure and raise living standards.

 

With signs of rising discontent over years of falling real incomes, rising prices, an increase in value-added tax and an unpopular plan to raise the pension age, Putin is under pressure to deliver.

 

Igor Nikolaev, director of auditor FBK's Strategic Analysis Institute, said Putin might have to take money from other parts of the budget to fund a new arms race which would force him to scale back social spending plans or dip into the national wealth fund to top up the budget.

 

If a burgeoning arms race intensified, such a scenario would become more likely and Putin would be reluctant to spend more on defence in the current political climate, he said.

 

"It would not be desirable, especially as we know what's happening with real incomes and that there are problems with his rating," said Nikolaev. "Cutting spending on national projects would receive a mixed reaction."

 

Though re-elected last year until 2024, and therefore not under immediate political pressure, Putin's trust rating has fallen to a 13-year low. A poll this month showed the number of Russians who believe their country is going in the wrong direction hit its highest level since 2006.

 

Putin's symmetrical response to Washington, which involves developing new missiles, has already angered some Russians.

 

"Are new arms a source of joy?" wrote blogger Vladimir Akimov, saying the money would be better spent on lifting people out of poverty. "Why not begin by repairing the roads and knocking down the wooden shacks (that people live in) across the country."

 

(Additional reporting by Andrey Ostroukh, Editing by Timothy Heritage)

 

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-- © Copyright Reuters 2019-02-08
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Time has proven what Putin says and what Putin does are often two completely different things. Something not fully accounted within the military budget are the legions of scientists working on secret R&D military projects at paltry wages.

 

Also, Moscow's glitz results from the impoverishment of the rest of the country. Many Russians know about Putin but lack options because bad things happen to his competitors. It's no wonder why Trump is so envious!

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Looking beyond the words, the public relations and all the media froth, ask yourself whether you think that a country whose population is seriously declining is one that is, by any measure, successful. Russia's population is declining so fast that even its own demographers say that by 2050 the UK and the Russian population will be about equal, at current trends.

 

Russia had its day in the sun, for as long as the high oil prices lasted. With plenty of supply in the ground all over the world and everyone trying their best to either economise on oil product use or finding alternatives, don't expect any serious price hikes in the future. Even with Venezuela with the largest oil deposits on Earth going off line, the price is not moving.

 

Back to Russia, without a captive audience in Germany for gas (from Gazprom), the country would probably be bankrupt. Already the population has turned against Putin and the only reason he is not facing an opponent is that the opposition has been so cowed, jailed or dead. But this does not mean that everyone is happy.

 

No one with resources is keeping their money in Russia, if they can get it out at all. The economy is tanking and because so many hands have to be kept happy, this level of cleptocracy is a drag on the economy. If they try taxing the economy in order to run an arms race on top of all of this, they will destroy the economy. Remember the last time this was done back in the USSR, they were only able to do it because the state owned everything. And even then they gave up because they were not able to keep up with the Americans, let alone everyone else.

 

All Putin can do is act as a spoiler. Yes, he can sacrifice a few hundred soldiers in Venezuela. Yes, he can send troops to Syria, which is really in his own back yard. And he can put a few hundred hackers on the government payroll who will try to change the results of elections. But eventually even those options, although costing Western countries more, run out of steam.

 

Eventually Putin will have to invest every more cash into internal intelligence, yes those people who spy on their own people. He will eventually face another election and will either have to bow out (unlikely as the next guy will indict him for all the crimes of corruption), face the election (unlikely as he will lose) or not have an election at all because of some "emergency." That would be worrisome as it might involve other countries and Putin has shown some skill in that regard!

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Having read the article about Russia ,I can see it doesn't give the real facts. The comments  lack knowledge about Russia too. Russia population is currently 143,90million people. There is a decline , not a big one ,but the trend can be reversed ,it can't be predicted with precision whether the population will grow a bit , or stagnate or decline in 50 years. Russia hasn't got a flow of immigrants like Western Europe . And the immigrants bring large families too. Russia is 9th most populous country in the world, and at the same time the largest country in the world. They have become a Grain superpower  ,non genetically modified wheat exports have exploded , good profit for them. The rare precious metals come mostly from Russia, although they can be found in a small number of other countries too. They have got rich resources and they don't need to import oil, gas, etc. And despite of sanctions they still trade with the West and US. For instance US buys Russian gas too. When it comes to arms and weapons they have got enough to deter and defend themselves, and sell to others. They are not ramshackle ,obscure and backward country anymore.

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2 hours ago, looking on the bright side said:

Having read the article about Russia ,I can see it doesn't give the real facts. The comments  lack knowledge about Russia too. Russia population is currently 143,90million people. There is a decline , not a big one ,but the trend can be reversed ,it can't be predicted with precision whether the population will grow a bit , or stagnate or decline in 50 years. Russia hasn't got a flow of immigrants like Western Europe . And the immigrants bring large families too. Russia is 9th most populous country in the world, and at the same time the largest country in the world. They have become a Grain superpower  ,non genetically modified wheat exports have exploded , good profit for them. The rare precious metals come mostly from Russia, although they can be found in a small number of other countries too. They have got rich resources and they don't need to import oil, gas, etc. And despite of sanctions they still trade with the West and US. For instance US buys Russian gas too. When it comes to arms and weapons they have got enough to deter and defend themselves, and sell to others. They are not ramshackle ,obscure and backward country anymore.

 

Having read your post, I can see it doesn't include much by way of facts - real or imagined. 

 

Russia's demographic issues and projections were covered on numerous articles. That you claim the situation can be reversed or that predictions cannot be projected is nice, but not particularly convincing.

 

AS for immigration issues, officially not much trouble, true. Then again, this doesn't quite how things are along parts of Russia's border with China.

 

Given that freedom of information is not much of a thing in Russia, relying on government approved figures is a choice.

 

Russia does have plenty of resources, a huge landmass, and a large population - these by themselves, however, do not quite add up to the picture you're trying to paint. Would perhaps be more accurate to say that Russia got a lot of potential, but that realizing is would require change.

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