The Russia Monitor: Jan 3, 2010

03 January 2010

Russia 2010 - TRM's Stories to Watch

1/03/2010 |

Posted by Jesse |

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Post-START Negotiations - PM Putin generated some controversy the other day with comments that appeared to link any deal on nuclear weapons reductions to U.S. plans for ballistic missile defense. Over here, many observers argued that Putin was torpedoing a potential deal. In fact, we've seen this movie before ... multiple times. As Josh Rogin over at Foreign Policy noted, "linkage" has been the immutable Russian position since SDI/BMD technology was discovered. The strategic explanation is that Russia's strength vis a vis the U.S. lies in its ability to totally destroy us in the event of a nuclear exchange. This way, nobody here (or there) will ever think that a first strike is a good idea. Thus, it is tricky to ask Russia to reduce the number of these weapons while simultaneously deploying a defensive system that diminishes the efficacy of its remaining weapons. If I had to guess, I would say that the U.S. negotiators just spent six months negotiating almost everything but missile defense, hence the press quotes from participants about being "so close." This is the Reykjavik Scenario and was foreseen before the first Moscow Summit this summer. Most recently Russia has been criticizing the reductions verification measures, stating that it is time to end the "excessive suspiciousness" of the Cold War era. Of course, this is the same response the U.S. side has when Russia discusses BMD in "balance of power" terms. My guess is that neither side is ready to put down its Triple Sling Jigger just yet. Late last week, the negotiating teams retreated to their home camps to review the draft agreements in anticipation of a "final" meeting in Geneva (it won't be final).
Russia's Economy - What goes down...? - In 2009, Russia's GDP dropped approximately 9% and industrial production fell 12%. By mid- to late-2009, however, the country did stop the bleeding in the area of foreign investment. But, the main source of this turnaround was in the form of "other" capital entering the country (i.e., not foreign direct investment or foreign portfolio investment). I have argued before that Russia's susceptibility to the global financial crisis lay not in its dependence on the export of natural resources, but in its overleveraged and overly-concentrated corporate sector (including both state corporations and oligarch companies). Now, it appears that Russian firms are trying to extricate themselves from the crisis by relying on the same financial sources which left them in such a desperate situation to begin with.
Medvedev v. Putin - I think most observers by now will acknowledge that this has nothing to do with the relationship between the President and PM. Instead, the real battle is between the teams or gruppirovki that surround each figurehead. The contrasting profiles and consequent frictions between the two sides are so predictable, so cliche, it's almost as if they are from a Disney movie about high school. Putin's team would be the athletes and troublemakers, Medvedev's team the honor roll students, computer geeks, etc. Whether this is the product of design or chance is impossible to know. In any case, the teams are formed and the battles are heating up. The first open legislative dispute between the two sides was over the Law on Retail which recently passed the Duma. Russian media tend to conclude that Medvedev's team won that round, as key 'liberal' provisions in the law were left untouched. It will be interesting to see how these 'liberal' vs. 'conservative' debates spill out into public space, and to see whether the 'leader' of each group takes a more active role.