Dr Pádraig Carmody, Trinity College Dublin:
“The way I see it…
is that either the current model of global economic integration for Russia
or Putin’s expansionist/reactive foreign policy will have to give.”
Karl Marx and Friedrich Engels famously wrote that a spectre was haunting Europe. That spectre they said was communism. A new spectre haunts Europe currently – communism’s ghost or more precisely a type of ghost geopolitics, with the former Soviet leader Mikhail Gorbachev warning about a new cold war between Russia and the West. On assuming office President Obama declared that he wanted press the reset button on relations with Russia. However this has not been possible, perhaps because of perceived Western expansionist ambitions in Eastern Europe, through the growth of the North Atlantic Treaty Organization, and most recently support for the overthrow of the pro-Russian government in Ukraine.
The current President of Russia, Vladimir Putin, has claimed that the collapse of the Soviet Union was the greatest geopolitical catastrophe of the twentieth century. Since his ascent to power in 2000 he has sought to re-establish Russia as a “Great Power” and to exert influence, and in some cases annex the near abroad. However, while the high oil price facilitated the recovery and growth of the Russian economy in the new millennium, there is a contradiction at the heart of Putinism as an autonomous “foreign policy” may not be compatible with global economic and financial integration , even if it is domestically popular and politically expedient.
The Soviet Union could pursue a relatively autonomous foreign policy because its economy was centrally planned and largely autarkic. The current context is very different as the “low geopolitics” of financial and trade integration exert greater influence than Putin had perhaps bargained for when he annexed Crimea or got Russia embroiled in Eastern Ukraine. While Putin has accepted Western-led financialisation he has not accepted Western-led geopolitics, and the outcome of this contradiction is now finding expression in Russia.
Many scholars have noted that globalisation has brought a reduction in inter-state war. As countries’ economies have become more integrated the costs of inter-state armed conflict have risen and as transnational financial capital is highly mobile, there will often be substantial capital flight when this occurs. This has not stopped Putin from using direct military force in Russia’s near abroad however.
Territorial forms of power are no longer independent of non-territorial forms of power, if they ever were, and the United States is still able to synergise these as many of the most important financial companies in the world are still based there. For example Visa and Mastercard have suspended service in Crimea, after its annexation by Russia, to comply with American sanctions.
In late 2014 there was a joke circulating in Russia that President Putin would turn sixty three this coming year, the price of a barrel of oil might fall to $63 and the rouble might fall to 63 to the US dollar. Both oil and the rouble fell below this. A question remains around the stability and longevity of President Putin’s regime in light of the economic crisis set to be unleashed in Russia by the “perfect storm” of falling or low oil prices, rapidly rising inflation, a falling or unstable rouble and dramatically increased interest rates.
Recently the Russian central bank raised interest rates to 17% to try to retain and attract capital to the country and curb inflation. While the rouble stabilised in the latter part of 2014, high interest rates will curb both consumption and investment and result in an even more severe economic contraction in Russia. The Russian government has substantial oil and gas generated foreign reserves, of around US $400 billion, some of which it is expending on defending to the currency. The economic options then appear to be narrowing as the imposition of capital controls become more likely; absent a change in geopolitical course.
To-date Putin’s domestic authoritarianism has been successful, or at least compatible, with high public approval ratings and the renationalisation of the “commanding heights” of the Russian economy (major natural resource companies) allowed for rapid economic growth in the context of the global commodity super-cycle. However, whilst these domestic policies did not deter transnational investment in other sectors, military expansionism and Western sanctions do. For example the rubble has fallen so fast that Apple has suspended sales of its products in Russia, as profit margins cannot be known and Russians are scrambling to buy luxury goods imported from abroad before their prices increase dramatically.
There are a variety of international relations theories which have been used to explain the current conjuncture. Some claim that as the United States has experienced hegemonic decline that it can no longer set and enforce the rules of international relations and that (re)emerging powers, such as Russia and China, are testing the boundaries, both literally and metaphorically, in places such as Ukraine or the East and South China Seas. What these analyses largely neglect however is the geopolitical power of transnational capital. Rather than state actors, such as the US or EU, exerting pressure on Putin, it may be primarily transnational capital which does this.
The rhetoric of a “new cold war” is then misplaced. This is not because Russia does not have a substantial, even formidable military; it does. It is because the Russian economy is now largely capitalist and globally integrated. The structural power of transnational capital is opposed to the kinds of geopolitics which President Putin is currently pursuing, reducing him to pleading with Russian’s with overseas capital to repatriate it; proclamations about the strength of the nation notwithstanding. Pressure on exporters to sell foreign currency and reassurances over the payment of upcoming debt have stemmed the ruble’s decline recently. Nonetheless the coming years could be very difficult not just for people in Ukraine, but also for those in Russia, including President Putin.
President Putin has attempted to reverse the geopolitical expansion of the West in Russia’s near abroad. However, it seems unlikely that he can “successfully” pursue a relatively autonomous, militaristic foreign policy in the context of globalisation. Either the current model of global economic integration for Russia or Putin’s expansionist/reactive foreign policy will have to give. A spectre is haunting Europe – a ghost geopolitics from another era. How long this will remain the case is unclear.
Dr Carmody thanks Adam Swain for his comments.
Scholars who contribute to the “The Way I See It” series write in a personal capacity. The views expressed in this forum do not always reflect those of the organisations to which the authors are affiliated or those of the editor of this series.