The Author

Toni Michel

Toni Michel is a European and Eurasian Affairs analyst. He is holding an MA from MGIMO University and is working with various Civil Society Organisations in Europe and the post-Soviet space.

Following his re-election on 18 March, Russia’s old and new president Vladimir Putin was inaugurated in the Kremlin on 07 May. Both the dates of the election and the inauguration were deliberately chosen to closely connect the figure of Putin to widely popular national events: the usurpation of Crimea into the Russian Federation four years ago and the yearly victory day celebrations on Wednesday.

Nearly two decades after Putin’s accession to power as Prime Minister in 1999, many observers have noted the inertia in Russia’s economy and society where Brezhnev-style stagnation appears to have set in. Even as the country has returned to modest growth and profits from higher returns due to a slowly recovering oil price, both national and international analysts point out that direly needed growth of over 2% will be hard to achieve.

Particularly, structural problems of corruption, disincentives for bottom-up entrepreneurial activity and politicised judiciary decisions stand in the way of progress. Given that the current political system around Putin relies to large extents on this status quo, reforms are likely to be largely symbolic.

At the same time, there seems to be some recognition in the Kremlin that it cannot rely on foreign policy adventures like Crimea, the Donbas and Syria for legitimacy forever as excacerbated economic problems and corruption are further nabbing away at the social contract of “rising living standards for political loyalty” that worked so successfully in the 2000s.

A large-scale domestic investment programme into infrastructure, healthcare and human capital of 11 trillion roubles over 6 years has thus been announced. At the same time, Russian military spending was cut back 20% to US$66,3 billion last year for the first time since 1998 due to a weak economy and sanctions. Previously, defence was a “holy cow” and the government had rather opted to cut social and educational spending instead.

Now, Russian defence expenditures are expected to stay flat until 2020 or possibly even fall further due to inflation. The Kremlin also said that Russia would cut its defence budget to less than 3% of gross domestic product within the next five years. Before the cuts, defence spending per GDP stood at 5,5% in 2016, requiring either substantial growth or further cuts in military expenditure. It is highly likely, though, that the cuts will mainly concern the main standing army intended for territorial defence and not the mobile intervention forces that operate at higher standards and were used in Crimea, the Donbas and Syria.

Other forms of Russian assertiveness, particularly information operations and cyber-attacks, come relatively cheap, though. Given heightened attention among Western governments and societies as well as substantial suspicion towards Moscow in many parts of the world, a wise Kremlin policy might soon re-evaluate the effectiveness of these tools.

Crucially, though, Russia’s threat assessment according to which the West pursues an active encirclement policy aimed at fostering colour revolutions and regime change in Russia has not changed; lashes from Moscow must still be expected should (more or less pro-Western) street protests threaten regimes in what Russia sees as its sphere of influence.

The recent peaceful change of government in Armenia was luckily not seen through that lense as the opposition neither wants to join Western institutions nor take the country out of the Moscow-led Eurasian Economic Union. But Belarus and, potentially, post-Nazarbayev Kazakhstan still give cause for concern.

The idea of re-attaching the Donbas to Ukraine on the Kremlin’s terms (including autonomy of the region and a veto over Ukraine’s foreign policy) can become more and more appealing to Moscow, given the gigantic Russian expenditures on the Donbas. Wage payments alone for the Donetsk and Lugansk regions apparently cost the Russian state over €1 billion a year.

Returning the region to Ukraine could furthermore destabilise the pro-Western consensus in the country and hamper Kyiv’s slow economic recovery and prospects. A UN peacekeeping mission ahead of the implementation of some of the Minsk Agreement or some other future accord, could go some way towards that goal. This could also bring Moscow some sanctions relief that some in the West would be eager to provide.

There thus appears to be a window of opportunity around the World Cup to once again re-brand Putin and attempt to take Russia out of its pariah role internationally, at least in part. Much depends, however, on how far the Kremlin is able to escape the psychoses and fortress mentality so skillfully fostered by its own spin machine.

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