TRUMP’S CODE: Making Money on Populist Disorder II
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Translation: Fairpress

Author: Munir Podumljak

Russia reaps the benefit…
After the fall of the Berlin Wall, Russia was initially highly dependent on international aid (receiving over USD100 bn in total[1]). But by the late 2000’s, its financial reserves boosted by increased prices for global commodities, it was no longer dependent on western aid and had itself embraced the strategy of ‘cheque book diplomacy’ as a way of increasing its influence on the world stage, spending almost USD1 bn a year on financial assistance to political allies.[2]

The key to Russia’s economic growth was oil. In the mid-2000’s, Russia managed to maximize outputs from its oil production and to expand its oil industry, to become one of the fastest-growing economies in the world (see Figure 1).

Source: OECD[3]

However, the Russian economy’s dependence on oil – as well as other commodities – made it highly vulnerable to the wide fluctuations in the global oil price seen since 2000. The 9/11 attacks and subsequent war on terror affected the oil trade and exposed global markets to unpredictable stresses. But the growing energy demands of newly emerging economies, such as China, India and Brazil, boosted demand for oil, while the supply infrastructure remained much the same as it had been in the 1990’s. The sanctions on Iran effectively removed one of the largest participants in the oil market, causing a massive shock to the global oil supply chain, and the price of oil recorded steep growth (see Figure 2).

Source: Macrotrends LLC[4]

The Russian economy was one of the key beneficiaries, its GDP growing in line with the fluctuation in world oil prices (see Figure 3), and by 2013 Russia had become one of the top ten world economies.

Source: Macrotrends LLC[5] and The World Bank[6]

…and invests in military might

Russian financial reserves ballooned from USD12.3 billion in 2000 to USD598 billion in August 2008, opening up new opportunities for Russian President Vladimir Putin.[7] Putin invested much of this in military budgets, which increased from approximately USD20 billion in 2000 to USD40 billion in 2008[8] and reached almost USD70 billion in 2016 (see Figure 4).

Source: Authors’ own computation based on SIPRI data[9]

This laid the foundations for Putin’s first challenge to the western

world in the form of a direct political and military showdown. At the beginning of August 2008, after months of intentionally escalating a crisis in diplomatic relations with Georgia, involving the EU, US and NATO, Russia launched a full military attack on Georgian territory (in the South Ossetia and Abkhazia region). Overwhelmed by the global financial crisis, and with relationships between the US and the EU somewhat shaky, the response from the West was meagre. Putin was permitted to advance his ultimate objectives – to undermine US global dominance, stop the expansion of NATO to the former Soviet republics, and frustrate EU efforts to diversify its energy supply.

The Georgian war was also the first time in history that a military attack was accompanied by a full cyber-attack on the IT infrastructure of that country[10], allowing Putin to test out another emergent weapon. The cyber-attack especially affected the government sites, news and information distribution networks. According to Ambassador David J. Smith, “DDoS attacks on Georgian government websites, particularly the president’s website, began more than two weeks before the kinetic Russian invasion. On the day the kinetic war started, sites such as ‘stopgeorgia.ru’ sprang up with a list of sites to attack, instructions on how to do it and even an after-action report page. It is instructive that all this was ready to go—surveys, probing, registrations, and instructions—on day one! An Internet blockade was traced to five autonomous systems—four in Russia and one in Turkey—all controlled by the criminal syndicate RBN [Russian Business Network].”[11] Multi-layered attacks were conducted on Georgian media for example ‘apsny.ge’ and ‘news.ge’.[12]

After a brief setback in 2008 as a result of the global economic crisis, the Russian economy recovered again, with total GDP reaching a record of USD 2.23 trillion in 2013. Despite their disagreements on foreign policy, the growth in Russia’s economic and military power and the escalation of conflict during the Georgian episode motivated the US, NATO, the EU and some key EU member states to engage in building a joint response to Putin’s new game.

Then in 2013, while western allies were engaged in multi-level diplomacy on many emerging issues – the Arab spring, disagreements within Europe and between Europe and the US over the Middle East, etc. – Putin decided to parade Russia’s economic and military prowess in another showdown with the West. This time, the primary target of his military operations was Ukraine, a country critical to US and NATO strategic interests, as well as for the EU’s neighborhood policy and its energy supply.

Putin’s move was almost a tactical replica of the Georgian case in 2008, differing only in his use of informal rather than formal military action. After an intense period of heated diplomacy and escalating threats, Russia decided to make a move through the pro-Russian president of Ukraine, Viktor Yanukovych. In November 2013, Yanukovych withdrew from negotiating an agreement with the EU within its Eastern Partnership framework, triggering the outbreak of protests across the country which threatened to descend into civil war.[13] Three months after the violent protests had begun, Viktor Yanukovych fled to Russia, and Russian unmarked military personnel marched in to occupy Ukraine’s Crimea region. Within two weeks, Russia had completed its annexation of Crimea in a referendum that was slammed by Ukraine and most of the world as illegitimate.[14] This time, Russia’s actions triggered a much stronger response from the western allies, forcing them to overcome their own disputes and initiate a more productive collaborative effort.

Read more in the next article

 

This article was created with the support of the Fund for the Promotion of Pluralism and Diversity of Electronic Media within the project “Media Reality” – Developing and Encouraging the Media Literacy Programme

 

 

Connected article: TRUMP’S CODE: Making Money on Populist Disorder I

 

[1] Aslund, A. (2000) Russia and the International Financial Institutions. Carnegie Endowment for International Peace, [online]. Available at: https://carnegieendowment.org/2000/01/18/russia-and-international-financial-institutions-pub-406 [Accessed 10 Jul. 2018].

[2] For example, from 2011 to 2015, the Republic of Nicaragua received nearly US$150 million in Official Development Assistance (ODA) from Russia—not to mention millions more in military aid. Nicaragua is one of the few countries in the world that recognizes Abkhazia and South Ossetia.

Asmus, G., Fuchs, A., Müller, A. (2018) Russia’s foreign aid re-emerges. AIDDATA [online]. Available at: https://www.aiddata.org/blog/russias-foreign-aid-re-emerges  [Accessed 10 Jul. 2018].

[3] OECD (2017) Crude oil production. [online]. Available at: https://data.oecd.org/energy/crude-oil-production.htm [Accessed 10 Jul. 2018].

[4] Macrotrends (2018) Crude Oil Prices – 70 Year Historical Chart. [online]. Available at: https://www.macrotrends.net/1369/crude-oil-price-history-chart [Accessed 10 Jul. 2018].

[5] Macrotrends (2018) Crude Oil Prices – 70 Year Historical Chart. [online]. Available at: https://www.macrotrends.net/1369/crude-oil-price-history-chart [Accessed 10 Jul. 2018].

[6] The World Bank (2018) Data: Russian Federation. [online]. Available at: https://data.worldbank.org/country/russian-federation [Accessed 10 Jul. 2018].

[7] The Central Bank of the Russian Federation Source Central Bank of Russian Federation (2018) International Reserves of the Russian Federation. [online]. Available at: http://www.cbr.ru/eng/hd_base/mrrf/mrrf_7d/ [Accessed 10 Jul. 2018].

[8] SIPRI (2018) Military expenditure by country, in constant (2016) US$ m., 1988-2017. [pdf]. Available at: https://www.sipri.org/sites/default/files/1_Data%20for%20all%20countries%20from%201988%E2%80%932017%20in%20constant%20%282016%29%20USD.pdf [Accessed 10 Jul. 2018].

[9] Stockholm International Peace Research Institute – SIPRI (2018) SIPRI Military Expenditure Database. [online]. Available at: https://www.sipri.org/databases/milex [Accessed 10 Jul. 2018].

[10] Markoff, J. (2008) Before the Gunfire, Cyberattacks. The New York Times, [online]. Available at: https://www.nytimes.com/2008/08/13/technology/13cyber.html [Accessed 10 Jul. 2018].

[11] Smith, J. D. (2014). Russian Cyber Strategy and the War Against Georgia. Atlantic Council, [online]. available at: http://www.atlanticcouncil.org/blogs/natosource/russian-cyber-policy-and-the-war-against-georgia [Accessed 10 Jul. 2018].

[12] Markoff, J. (2008) Georgia Takes a Beating in the Cyberwar With Russia. Bits (Business, Innovation, Technology Society) – The New York Times. [online]. Available at: https://bits.blogs.nytimes.com/2008/08/11/georgia-takes-a-beating-in-the-cyberwar-with-russia/ [Accessed 10 Jul. 2018].

[13] Milanova, B. (2013) Clashes continue for 2nd day in Ukraine after it pulls out of talks with EU. CNN, [online]. Available at: https://edition.cnn.com/2013/11/25/world/europe/ukraine-eu-clashes/index.html [Accessed 10 Jul. 2018].

[14] Thompson, N. (2017) Ukraine: Everything you need to know about how we got here. CNN, [online]. Available at: https://edition.cnn.com/2015/02/10/europe/ukraine-war-how-we-got-here/index.html [Accessed 10 Jul. 2018].

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