· Germany’s Weak Negotiating Power
· Putin’s Strategy to Maintain Power
· Russian International Affairs Council: Russia and Europe
· Washington Post: Hillary Clinton’s agenda would flounder in Congress. Here are seven reasons why
· Iran, Oman to Change Gas Pipeline Route: Omani Minister
· The History of Sergei Ivanov
· New York Times Magazine: the Arab world’s undoing since the invasion of Iraq.
Aug. 15, 2016. Berlin’s authority in negotiations with Russia and Turkey is outweighed by the U.S.
German Foreign Minister Frank-Walter Steinmeier’s meeting with his Russian counterpart, Sergey Lavrov, in Yekaterinburg, Russia to discuss the latest escalation in Ukraine and the impasse over Syria; German State Secretary Markus Ederer rushed to Turkey to, in the words of the German Foreign Ministry, “re-establish direct channels of communication” with the Turkish authorities.
Germany has criticized Turkey’s actions following the failed coup, which caused a strain in relations with Ankara. This raised further questions over whether the European Union’s refugee deal with Turkey will be fulfilled.
These meetings are a small indication of a larger problem for Berlin: it is facing a growing number of crises, at home and abroad, that it has limited power to address.
For Germany, stability in Ukraine and the European Union’s agreement with Ankara on refugees are key priorities. Surrounded by instability, Germany is attempting to play a leadership role in resolving regional crises, but finding that in reality Washington – and not Berlin – holds the cards. Germany’s ability to shape Russia’s actions in Ukraine and Turkey’s trajectory is limited.
For Germany, stability in Ukraine is key. Last week, Russia accused the government in Kiev of conducting a raid in Russia-controlled Crimea and threatened to call off planned talks with Ukraine, Germany and France. Since the annexation of Crimea and outbreak of hostilities in eastern Ukraine in 2014, Germany has attempted to position itself formally as a mediator in the conflict, leading rounds of negotiations between Russia and Ukraine.
Berlin has sought this role not only because of concerns regarding conflict on Europe’s periphery, but more importantly because Germany fears that an escalation in Ukraine would exacerbate the EU’s fragmentation. The German government is aware that there are already serious divisions within the EU on issues ranging from refugee policy to economic and security matters. Increased Russian aggression in Ukraine would deepen divisions between countries (like the Baltic states and Poland) that see Russia as an existential threat and countries (mainly in southern and Western Europe) for whom Russia is a secondary challenge.
While Germany has sought to act as a mediator in the conflict, Berlin’s ability to influence Moscow or play a significant role in negotiating a deal is limited. European governments’ main tool for shaping Russia’s behavior is the sanctions regime currently in place. However, sanctions are now a relatively minor thorn in Russia’s side compared with low oil prices, which are the primary cause of the country’s economic woes – and which Germany cannot control. While Germany and France are the main formal negotiators between Russia and Ukraine, Berlin is not in a position to help deliver or guarantee the key compromises Moscow is seeking.
Instead, the U.S. is playing the dominant role in the negotiations. The Kremlin would like guarantees that Ukraine would remain a neutral power and would not join NATO or receive significant military assistance from the West. While Germany in the past has politically supported pro-Western forces in Ukraine, it is not a military player in the region.
A deal negotiated by Berlin would be worthless, from Russia’s perspective, without America’s formal or informal agreement.
A similar dynamic is at play when it comes to Germany’s relationship with Turkey. The refugee crisis has highlighted the incoherence of decision-making in the EU and deepened the bloc’s unpopularity among many of its citizens. The European Union’s deal with Turkey, reached in March, is Europe’s key mechanism for reducing the flow of refugees into the bloc. In return for taking back refugees, Turkey was promised not only funding, but – if it meets 72 criteria outlined by the EU – visa-free travel to the Schengen Zone.
The idea of visa-free travel for Turkish citizens is not only deeply unpopular among European voters, but has also sparked security concerns among European policymakers. The fulfillment of all the agreement’s terms looked to be a difficult feat even at the time the agreement was signed. Following the failed coup in Turkey, both sides understand – even if they do not admit it publicly – that visa-free travel is off the table.
Turkish authorities have threatened to abandon the migrant deal with the EU if progress on visa-free travel is not achieved, but in reality they are probably seeking other concessions. However, Berlin has relatively few concessions to offer Turkey, other than funds. And while Turkey would gladly take the money, Ankara’s wish list of concessions from the West primarily revolves around security issues, especially when it comes to NATO and Syria. Turkey is engaged in negotiations with Moscow, Washington and the EU (represented primarily by Berlin). But Turkey’s approach to each of these three relationships changes based on what Turkey thinks will get it the best deal. When Ankara threatens to in effect reignite a large-scale refugee crisis in Europe, it knows that its actions are being evaluated not only in Berlin and Brussels, but also in Washington.
Berlin is concerned about stability in Ukraine and Turkey’s moves, but highly publicized diplomatic talks mask Berlin’s limited options. Germany may be a key player in Europe and the Continent’s largest economy, but when it comes to negotiations with Ankara and Moscow, it is the U.S., and not Germany, that is in a position to make deals and alleviate crises.
From our Russian news desk:see attachments.
Russian International Affairs Council: Russia and Europe – Somewhat Different, Somewhat the Same?
There are more issues that divide Russia and the EU than that unite them.
Although both sides support the fundamentals of the current world-order (especially when confronted with a challenge like IS),
Russia believes that the current arrangement does not grant equality and is asymmetrically patterned after the West.
While civil societies on both sides believe that sanctions should be ended and relations strengthened,
and while both have incurred losses as a result of restrictive measures, they diverge on the conditions of
relaunching economic relations, on the feasibility of technical cooperation in the absence of political convergence,
and on what EU – Eurasian Economic Union (EEU) cooperation could look like.
While the EU and Russia feel the need to cooperate on a settlement in Ukraine, on stabilization in the Middle East,
on the fight against terrorism, they diverge over what should be done, over whether human rights / democracy
or security / stability should prevail, and over how international organisations should be used.
In this context two parallel tracks should be promoted.
The first one is ad hoc cooperation on burning common threats (the settlement in Ukraine and the fight against IS and terrorism),
or economic issues of immediate mutual benefit (aviation, the space, medicine, and gas).
Various international fora as well as bilateral EU-Russia arrangements should be open for this cooperation.
At the same time, sustainable long-term cooperation depends on conceptual discussions over the future set-up,
which would guarantee that the preferences of both sides are taken into consideration and neither feels discriminated or betrayed.
Mutual understanding is essential for these discussions, it can be cultivated through wider civil society
dialogue, more balanced media coverage, the preservation of existing economic links and expert discussions.
Only this conceptual settlement will reverse the current ‘divide-unite’ split in favour of more unity.
The Marginalia of Russia’s Foreign Policy Today / Russia’s Strategy for Interacting with Neighbouring Countries
The strengthening of Russia’s positions in the international arena as a result of its integration into global and regional political and economic institutions, as well as the desire to restore its positions in significant regions around the world still has not led to the shaping of a comprehensive strategy regarding its closest neighbours, that is, in relations with the countries of the former Soviet countries. For the most part, these countries remain outside the scope of Russia’s active foreign policy; Russia’s political elites perceive them as partners “by default,” as a priori economically dependent entities.
The author proposes applying a metaphor of “marginalia” to this group of countries; they are significant from both the political and economic points of view, yet they are not among the priorities of Russia’s real foreign policy efforts. No comprehensive work is being carried out with these countries; there is no long-term planning regarding them. The lack of goal-setting with regard to these countries leads to the fact that Russian diplomacy has to react to the signals already coming from in the former Soviet countries; Russian diplomacy does not independently shape its foreign policy in this area. At the same time, Russia’s desire to be an equal partner for the key world actors cannot be implemented without ensuring a loyal and friendly geopolitical environment. One of the measures to form such an environment is the creation of the Eurasian Economic Union (EEU). Today, however, given the economic instability and escalating external threats, this institution requires greater attention and work on a future-oriented strategy. This article discusses the current possibilities that Russian diplomacy could use in its relations with former Soviet countries to shape a politically loyal and economically predictable border zone. In its methodology, the article relies on comparative analysis, document analysis and case studies.
In the course of the research, groups of medium-term goals for Russia’s foreign policy regarding its closest neighbours were developed; the article also developed recommendation for optimizing Russian strategy in the post-Soviet space. (att.)
The History of Sergei Ivanov.
– 03-30-16: Carter Page:Trump’s New Russia Adviser Has Deep Ties to Kremlin’s Gazprom
– 07-07-16: Foreign policy adviser to US presumptive Republican presidential nominee Donald Trump, Carter Page, will deliver a lecture in Moscow on Thursday at the invitation of the New Economic School.
– 07-26-16: US Republican presidential nominee Donald Trump’s foreign policy adviser has not met with Kremlin Chief of Staff Sergei Ivanov contrary to reported claims, Kremlin spokesman Dmitry Peskov said Tuesday.
– 08-12-16: Russian President Vladimir Putin has released Sergei Ivanov, the chief of staff of the Russian presidential administration, from his duties, the Kremlin said Friday.
à In November 2005 Ivanov was appointed to the post of Deputy Prime Minister in Mikhail Fradkov’s Second Cabinet, with added responsibility for the Manufacturing industry and arms exports. On 15 February 2007 Putin elevated Ivanov to the post of First Deputy Prime Minister and relieved him of his duties as Defense Minister; he was appointed as First Deputy Prime Minister with responsibility over defense industry, aerospace industry, nanotechnology and transport. In June 2007 Ivanov was appointed chairman of the Government Council for Nanotechnology ( )
Baku Summit Paves Way for Iran-Russia Cooperation in the Caspian
The intention to reach an agreement on the issue and enhance cooperation in the Caspian Sea, demonstrated at the recent summit in Baku, could resolve the problem of transportation of Caspian energy resources into the waters of the Persian Gulf.
The recent summit of Russian, Azerbaijani and Iranian leaders in Baku will lead to greater cooperation in energy, security and regional issues, as the sides forward with the North-South corridor promoted by India, Jahangir Karami, Associate Professor of International Relations at the University of Tehran, told valdaiclub.com.
What do you believe is the future of the North-South corridor between the countries, were any decisions made on it?
There are some measures which can boost economic relations between Tehran and Moscow and Baku and, as a result, increase the three countries’ economic interdependence as a basis for expanded political and security relations – making the North-South Corridor operational; creating a railroad corridor for rapid transfer; providing software, legal and regulatory foundations for trade cooperation. The North-South Corridor project laid a basis for cooperation between regional countries to achieve the goal of regional development. This transportation route links India to Europe via a safer and shorter path and a very important one for Iran, Azerbaijan and Russia. According to a draft declaration which was approved by the leaders of the three countries, the sides have agreed to take effective measures to develop the existing infrastructure of transport – with the scope of consolidation opportunities in the transportation of goods and passengers along the international transport corridor "North – South". The three presidents also pledged to take effective measures to develop transportation and communication infrastructure in order to expand the opportunities for passenger and cargo transportation via the North-South corridor.
How important was the topic of the Caspian Sea during the talks?
The leaders of the three countries will intensify their cooperation in the energy field. The meeting could be viewed as the first step toward a resolution of the problem with regard to transportation of energy resources produced in the Caspian Sea. The intention to reach an agreement on the issue and enhance cooperation in the Caspian Sea, demonstrated at the recent summit in Baku, could resolve the problem of transportation of Caspian energy resources into the waters of the Persian Gulf. Since in the coming months summit of the Caspian countries is to be held in Kazakhstan, leaders of the three countries emphasized the adoption of the legal regime of the Caspian Sea can be a huge help to make decisions. In the final common statement approved by the leaders of the three countries, the sides emphasized that the Caspian Sea was the sea of peace, friendship, security and cooperation, and called to the necessity of the rapid adoption of the Convention on Caspian legal regime. Foreign Ministers were instructed to intensify efforts for the preparation for the Fifth Caspian summit. The new format will have a positive impact on regional processes.
What do you believe are the prospects for Moscow-Baku-Tehran cooperation, and how could it impact the situation in the Karabakh?
The role of regional countries, especially Iran and Russia, is very important and this partnership can provide the right perspective to help solve the Nagorno-Karabakh conflict. In the final statement of the meeting, the participants stressed that the three countries have also recognized that the unresolved conflicts in the region are a major obstacle to regional cooperation, and underlined the importance of their settlement on the basis of principles and norms of international law.
How important were the issues of regional security, terrorism and energy security at the meeting?
I think the South Caucasus countries together with Iran, Russia and Turkey have a common foundation for regional cooperation. The Baku summit is an important step for this purpose. This summit showed that the three sides are ready to develop mutually beneficial cooperation, the political dialogue at various levels and on all issues of mutual interest. The leaders expressed their willingness to combat terrorism, extremism, transnational organized crime, illicit trafficking in arms, drugs, as well as human trafficking and crimes in the sphere of information and communication technologies. President Rouhani, referring to Iran’s role in contributing to regional peace and development said, “Today, all countries in the world acknowledge that Iran’s role in the establishment of the security of the region is positive, effective and significant.”
Views expressed are of individual Members and Contributors, rather than the Club’s, unless explicitly stated otherwise.
This transportation route links India to Europe via a safer and shorter path and is very important for Iran, Azerbaijan and Russia.
Iran, Oman to Change Gas Pipeline Route: Omani Minister
News ID: 1155332 Service: Other Media
August, 11, 2016 – 18:08
TEHRAN (Tasnim) – Oman and Iran have agreed to change the route and design of a planned undersea natural gas pipeline to avoid waters controlled by the United Arab Emirates, Oman’s Minister of Oil and Gas Mohammed bin Hamad al-Rumhy said.
The planned pipeline would connect Iran’s vast gas reserves to Omani consumers as well as liquefied natural gas (LNG) plants in Oman that would re-export the gas.
After international sanctions on Tehran were lifted in January, the two countries renewed efforts to implement the project, but it has also been delayed by disagreements over price and US pressure on Muscat to find other suppliers.
In an interview, Rumhy said Oman and Iran were at an advanced stage of designing the pipeline and had agreed on a deeper option than originally envisaged to avoid crossing any third country’s borders, Reuters reported.
“Instead of the shallower option at around 300 meters (985 feet) deep, the pipeline is to plunge close to 1,000 meters below the sea’s surface. And it will be slightly shorter,” he said.
Rumhy did not say why the pipeline would avoid UAE waters. Omani and UAE officials have discussed the project but it is not clear if the UAE has given its blessing to the project or has objected to a route that would pass through its waters.
UAE officials have not discussed the matter publicly.
Oman still expects to invite companies before the end of 2016 to bid for the engineering, procurement and construction part of the project, Rumhy said without giving an estimate for the cost. The pipeline would be financed on a 50-50 basis by Oman and Iran.
“Oman has started talking to Japanese, Korean and Chinese parties to raise finance. And this option has been received very well. We are looking to receive finance for LNG as per the initial understanding.
"So finance will not be an issue, but we won’t have to go to the ministry of finance. We are looking at it as a self-funding project,” Rumhy said.
The minister predicted the pipeline would be commissioned two years after the award of contracts, but conceded that the level of gas prices might delay the project, adding that the pipeline would not be profitable in today’s market environment.
"I am not optimistic about the future of oil and gas prices, and we have an understanding with our partners that the market is not very encouraging."
In 2013, the two countries signed an agreement supplying gas to Oman through the pipeline in a deal that would be valued at $60 billion over 25 years.
Policy= res publica
Freudenberg-Pilster* Washington Post: Hillary Clinton’s agenda would flounder in Congress. Here are seven reasons why.
By James Hohmann – August 11 at 9:25 AM
THE BIG IDEA:
Hillary Clinton is trying to win a mandate to enact an ambitious economic agenda. During a rally in Des Moines yesterday afternoon, the Democratic nominee said she could create 10.4 million new jobs as president.
“In the first hundred days of my administration, we will make the biggest investment in new jobs, good-paying jobs, since World War II,” she said at a high school. “How are we going to do that? Well, we’re going to invest in infrastructure – our roads, our bridges, our tunnels, our ports, our airports. … We are going to do water systems. We’re going to do sewer systems. We are also going to build a modern electric grid.”
Clinton added that she’s “going to raise the national minimum wage” and “make sure that women finally get equal pay.”
“What I believe,” she said, “is that … we need a campaign that lays out the agenda so people can vote for it, so that when I’m elected, I can tell the Congress, ‘This is what the people of America voted for us to do!’”
For the sake of argument, let’s just assume Clinton wins. Here are seven reasons why the dynamic on Capitol Hill probably would not change much—
1. Republicans are almost certain to hold the House. The tea party wing might actually wind up with more leverage, not less, after November. Paul Ryan can afford to lose 29 seats, but even a loss of 15 to 20 seats would make his job as speaker much more difficult. “That’s because his losses in November would not likely come from Freedom Caucus members in their deeply conservative districts,” Paul Kane explains in his column today. “Instead, mainstream Republicans — Ryan’s most loyal allies — would suffer and, therefore, the Freedom Caucus’s size inside the entire Republican Conference would grow.”
2. Even in the very best case scenario for Democrats, they will wind up with no more than 53 or 54 Senate seats. That’s far short of the 60 needed to break filibusters (which Barack Obama had in 2009). Ted Cruz and other senators will continue to use this tool in order to advance their 2020 presidential ambitions.
3. Many Republicans will insist Clinton has no mandate to govern. They will try constantly to de-legitimize her and do everything in their power to make sure she’s a one-term president.
Donald Trump is laying the groundwork to question the very legitimacy of the election, which is deeply troubling, but lately conservative writers are beginning to plant the seeds to argue that a Clinton victory won’t actually mean there’s any popular support for what she ran on.
The Washington Examiner’s Philip Klein argued last week, for example, that Clinton will only win because the electorate thinks Trump is “a nutcase.”
“Despite a victory, she will still remain broadly unpopular and distrusted among a public that probably won’t have paid much attention to her actual policy proposals,” Klein argued. “Making the election about the implications of Trump’s turbulent behavior will make it harder for Clinton to claim a policy mandate, complicating her liberal agenda as president.”
4. As soon as this election is over, Democrats must turn their attention to protecting vulnerable incumbents in 2018. If she gets the Senate majority, the midterms could be a disaster for Clinton – just as 1994 was for her husband.
With the exception of the 2002 midterms after 9/11, the president’s party always loses seats after the first two years. This time, Democratic senators will be up for reelection in red states such as Missouri, Montana, Indiana, North Dakota and West Virginia. Republicans will do everything they can to prevent those members from getting wins that they can run on.
5. Trump and Clinton are both talking a lot about “investing in infrastructure.” But there’s very little appetite in the Republican conference for this sort of spending – especially without cuts elsewhere.
One man’s “infrastructure” is another man’s “stimulus package.” Because Trump is also promising “infrastructure,” and it polls especially well with non-college-educated white men, Republicans have stuck to hitting Clinton on character and trust. But once the election is over, you can take it to the bank that they will begin messaging on Clinton’s infrastructure plan the same way they did on Obama’s stimulus package. Remember all the jokes about shovel-ready jobs? And that was in the midst of the worst economic crisis since the Great Depression.
6. Congress could not even pass a relatively small, emergency appropriation to fight the Zika Virus after Republicans attached poison-pill riders. Keep in mind: A) This is during an election year. B) Republicans are fighting to save their majority. C) There’s an outbreak in Florida, the single most important swing state. D) There have been alarming stories about women giving birth to deformed babies. Let’s be real. If these mothers could not spur action, how will construction workers in hard hats do it?
We got a taste of what to expect from a Clinton White House in Miami on Tuesday, when the Democratic nominee criticized the GOP for not taking action on Zika. She said Congress should come back from its August recess to get something done. She sounded eerily like Obama has since 2011, trying to use the power of the bully pulpit to (unsuccessfully) press congressional Republicans to enact his priorities.
7. Bigger picture, and perhaps most importantly, a new president will not be able to break the gridlock that grips Washington without systemic change.
Over cocktails and coffees this August recess, lawmakers and leadership aides from the establishment wings of both parties have been buzzing about a depressing Atlantic cover story entitled: “How American politics went insane; it happened gradually – and until the U.S. figures out how to the treat the problem, it will only get worse.”
Jonathan Rauch argues that Trump didn’t cause the chaos, but the chaos caused Trump. “Our most pressing political problem today is that the country abandoned the establishment, not the other way around,” he writes.
“Chaos syndrome is a chronic decline in the political system’s capacity for self-organization. It begins with the weakening of the institutions and brokers—political parties, career politicians, and congressional leaders and committees—that have historically held politicians accountable to one another and prevented everyone in the system from pursuing naked self-interest all the time.
As these intermediaries’ influence fades, politicians, activists, and voters all become more individualistic and unaccountable. The system atomizes. Chaos becomes the new normal—both in campaigns and in the government itself.”
He believes demonizing and disempowering political professionals and parties is like spending decades abusing and attacking your own immune system. “Eventually, you will get sick,” Rauch writes. “Because that problem is mental, not mechanical, it really is hard to remedy.” (The piece is 29 pages printed out but quite thought provoking.
Read it here. / att.)
By JAMES FREEMAN
Daniel Henninger writes today that a November victory for Hillary Clinton “will empower, for a very long time, the forces now putting at risk one of the country’s incomparable strengths, its system of higher education.” Mr. Henninger says that political correctness and “destructive obsessions” of “diversity” are now destroying both the quality of scholarship and due process on college campuses. “A President Clinton won’t rein in any of this,” he adds. “The idea that a President Cruz or Kasich will ‘roll it all back’ in 2020 after 12 years of the federal cement drying is just not serious.”
Newly released emails that Hillary Clinton failed to turn over to the State Department “paint a picture of top Clinton aides at State eager to do favors for Clinton Foundation donors,” notes a Journal editorial. More of the 33,000 emails she refused to disclose could soon see the light of day. “If those emails do surface, she will try to blame Donald Trump or Vladimir Putin or WikiLeaks. But the fault will lie with Mrs. Clinton’s willful deception and gross negligence about handling official State business,” adds the editorial board.
Hillary Clinton last week retreated from her clam that FBI Director James Comey called her comments “truthful,” explaining that she may have “short-circuited.” But with her current explanation Mrs. Clinton is suggesting that she did tell the truth in her private meeting with the FBI, even if her public comments were false. Karl Rove calls on Mrs. Clinton to ask Mr. Comey to release the bureau’s notes from the interview so “voters have the information to decide for themselves whether Mrs. Clinton is being truthful or layering one lie on another.”
Meanwhile, believe it or not Donald Trump “may be laying the groundwork for a significant breakthrough in international monetary relations—one that could ultimately validate the rationale for an open global marketplace and restore genuine free trade as a vital component of economic growth,” writes Judy Shelton.
-à see attachments!
And: Pollster Zogby: ‚Back to a close race,‘ Clinton 38%, Trump 36%
DEBKAfile August 17, 2016, 1:29 PM (IDT)
According to a new Zogby Analysis of likely voters released Tuesday, the convention polling bumps for Democrat Hillary Clinton and Republican Donald Trump are over, and they are practically even – Clinton 38 pc to Trump’s 36 pc.
Trump’s team believes that online polls are more accurate because more and more voters prefer to give their opinions anonymously.
Pollster John Zogby is a specialist in digging into specific voting blocks. He reveals that some blocks which trended Democratic under President Obama are now behind Trump. Overall, he shows Clinton leading middle income voters, blacks, women and Hispanics. Trump leads among independents, men and older voters, while gaining ground among older millennials.
****************************************************************************************************************** Politics: From Vision to Action
Barandat* The New York Times Magazine has dedicated an entire issue to a single story:
the Arab world’s undoing since the invasion of Iraq
siehe Anlage / see attachment.
Council on Foreign Relations: Turkey Is No Longer a Reliable Ally
….Pro-government newspapers have accused American generals of smuggling coup plotters out of Turkey. The Turkish press has gone full tilt, asserting that former State Department official Henri Barkey was behind the coup. Now with the Woodrow Wilson International Center for Scholars, Mr. Barkey happened to be attending an academic conference in Istanbul as the coup unfolded.
The U.S. response to this has been timorous, with nary a word of public protest. It would be one thing to overlook the way the Turks have behaved if Ankara were indispensable to U.S. efforts in the Middle East and Central Asia. It is not.
Incirlik’s runways are important. The bombing of Islamic State is an American priority, as is funneling weapons to the Syrian rebels. But both missions could be carried out from elsewhere. The baseless allegations leveled at the U.S. suggest that Mr. Erdogan might rescind American access to the base merely to demonstrate that he can. It would be prudent for the U.S. to develop a plan to redeploy forces outside Turkey, making arrangements to use airstrips in Cyprus, Jordan and the Kurdish Region in Iraq, for example.
All of this should be a clarifying moment for American policy makers, demonstrating that Turkey and the U.S. no longer share values or interests. Rather than overlook Turkish excesses while hoping Mr.
Erdogan will come around, it is time to search for more reliable allies.
Reinventing the Levant.
AMERICAN POLICY toward the Middle East has been a dismal failure for the past thirty-five years, if not longer. Officials have approached policymaking in the Middle East without a clear sense of the region’s history, poverty, predominance of authoritarian rule or intraregional relationships. The failure begins with the concept of “separate peace”—the basis of the 1978–79 U.S.-sponsored negotiations between Egypt and Israel—which never led to a broader settlement. It has continued with Washington’s haphazard response to the tumult of the past five years since the Arab Spring, the rise of Daesh (ISIS) and the continuing stream of dislocations flowing from the invasion of Iraq. Each failure has only deepened the sense that the region is beyond repair. Hence, the American public and many elites are tempted by simplistic solutions—draw back from the region even further; deepen support for authoritarian regimes; take extreme measures to end refugee flows; provide Syrian rebels advanced arms; “carpet-bomb.” The sense of frustration is understandable, but doubling down on failed policies will not work.
There is a yearning for a more organic solution, one in which the governments and the people of the region have equal stakes. And, indeed, there is a model rooted in the region’s history that could be a solution. It enabled nearly four hundred years of peace and prosperity in the Levant. At its core is economic integration, with the free movement of goods and people across a broad swath of territory. Such an approach contrasts sharply with the present-day reality, to put it mildly. But the region is approaching a point of exhaustion, and the United States will have a new opportunity, as it did after the first Gulf War, to advance this model. It will find a receptive region. The habits of integration are deeply ingrained in Levantine culture and reside just beneath the surface, waiting to be tapped. A recent experiment suggests that this model is more than a historical artifact and can be successfully adapted to the modern context.
Six years ago, without American assistance, a movement seemed to be emerging that provided a new framework for economic and political cooperation in the eastern Mediterranean—including Turkey, Lebanon, Jordan, Syria and possibly even Israel—and offered a different vision of regional stability, one essentially integrationist. Though American media and officialdom paid it little attention, it represented the most significant development in the politics of the peace process in some years, and deserves close and careful examination. Now is the time for the United States to reflect on an honest historical accounting of the Mashriq’s (the Arab world east of Egypt) recent history, and then take action. Now is the time to advance “Integration for Peace.”
IN JUNE 2010, Turkey, Syria, Lebanon and Jordan announced a “free-trade zone” and visa-free travel among the four countries. This development built on the rapid expansion of trade relations between Turkey and its Arab neighbors. Trade among the countries of the Arab League and Turkey doubled between 2007 and 2011, to a value of approximately $30 billion annually. Cities like Gaziantep, which had long languished economically, were booming as a consequence of the rapid and dramatic expansion of trade with Syria and Iraq. One source estimated that half the region’s goods were bound for the Middle East, compared with just a quarter going to Europe. The language of the agreement struck a tone of inclusivity, noting that the “quadripartite mechanism . . . will be open to the participation of all the other brotherly and friendly countries in the region.”
Economically, the region became more integrated than it had been for nearly a century. Turkey rapidly overcame the difficulties of being a relatively resource-poor country by increasing its oil and gas holdings in Iraqi Kurdistan—a remarkable development that allowed Ankara to take a major regional role and lifted many of the limitations on its economic growth. The increased participation of Turkish companies in the region’s economic development, including production-sharing agreements in the energy sector with the Kurdistan Regional Government of Iraq, suggests not only Ankara’s increased economic weight in the region but also a new willingness to prioritize economics over political tensions. These deepened economic ties persist, offering a political buffer even as Turkey’s military operations against the Kurdistan Worker’s Party (PKK) and Syrian Kurds fray Turkish-Kurdish relations.
Cultural indicators of increasing sympathy and cooperation between Turkey and its Arab neighbors were just as strong as economic incentives. The BBC reported an upsurge of interest in studying Turkish in Gaza and throughout the wider Mashriq. Turkish soap operas and other television productions became hugely popular throughout the Arab world. Tourism between the Arab world and Turkey also increased, especially after the implementation of the visa-free travel zone; Arab travel to Turkey rose by nearly 50 percent in 2010 compared to the previous year.
Unprecedented security cooperation unfolded. In April 2009, Turkey and Syria launched a three-day joint military exercise, exchanging border forces and engaging in activities designed to enhance the military capabilities of both countries. At the same time, the two nations signed a military technical cooperation agreement. These developments caused angst in Israel and the United States, both of which perceived the military exercises as an implicit threat to the former and a turn away from Turkey’s traditionally strong ties to the Jewish state.
Turkish-Syrian cooperation alarmed Riyadh, which viewed it as a threat to the kingdom’s regional influence. From the Saudi perspective, a Tehran-Baghdad-Damascus axis was bad enough, but an arrangement that brought Ankara into the fold would decidedly diminish Riyadh’s influence and fundamentally threaten its interests. The Saudis swung into action and played no small part in putting a halt to the integration project through the tried-and-true tactic of checkbook diplomacy. In April 2011, the head of Saudi Arabia’s largest commercial lending bank announced that the kingdom would invest $600 billion in Turkey over twenty years. That was soon followed by an announcement from Saudi Arabia’s largest construction company, the Binladin Group, that it was investing $500 million in Turkey’s real-estate sector. In March of that year, Syrian protesters, inspired by popular revolts in Tunisia and Egypt, took to the streets and were met with a vicious response from the Assad regime. The Saudis saw a chance to deal a devastating blow to Iran’s regional ambitions and eventually funneled money and arms to a range of sectarian actors, some of them bedfellows with Al Qaeda and other terrorist groups. By the fall, Turkey imposed sanctions on Syria, and the Mashriqi project, which showed such promise, disintegrated.
The United States viewed the project with considerable suspicion. Washington saw Turkey’s turn towards Syria as a sign of increased hostility toward Israel (an anxiety heightened by the Mavi Marmara incident) and perceived tighter economic and political collaboration in the region as a potential threat to American interests. U.S. officials continued to accept divisions in the Middle East, in the British and French tradition. Some American commentators went so far as to disparage these budding alliances as a form of “neo-Ottomanism,” conjuring up eighteenth- and nineteenth-century Western fears about a global Muslim takeover. In the United States, there has been no recognition of the historical basis for this integration or any honest assessment of its potential value for the stabilization of the region.
In fact, this short-lived experiment represented a broadly positive development for the nations involved, and for the Middle East more generally. The failure to nurture it was a missed opportunity to insulate the region against Daesh. The incorporation of these countries into a single economic zone is the first step towards reclaiming an identity destroyed by colonization during the first half of the twentieth century. It could provide a path forward towards stability, the defeat of violent extremism, economic development and eventually the normalization of relations with Israel—all goals the United States should support.
THE ESSENTIAL political, economic and cultural unity of the region called the Levant in the West and the Mashriq in the Arab world, which today encompasses Israel, the Palestinian territories, Jordan, Lebanon, Syria and parts of Iraq and Turkey, is an old concept that has been disrupted only in the twentieth century. Prior to the Western interventions that resulted in the creation of the Middle East’s contemporary nation-state system, the Mashriq existed as a political and cultural entity characterized by a cosmopolitan, polyglot culture and an economy based on extensive trading networks.
The Ottoman Empire, which began to expand outward from eastern Anatolia in the fourteenth century and solidified its position by capturing Constantinople in 1453, conquered much of the region now known as the Mashriq beginning in 1516. The Ottomans absorbed the Mashriq by way of major public works, an empire-wide defense system and large-scale taxation schemes. However, the Ottoman administration allowed a good deal of local control, appointing governors from prominent local families and depending on local notables to conduct the empire’s business. The Mashriq developed as a coherent Arabic- and Turkish-speaking region from the sixteenth through the nineteenth century. Like the rest of the empire, the Mashriq included substantial religious minorities; its Christian and Jewish populations were governed under the so-called “millet” system, which involved a degree of communal autonomy in return for additional tax obligations. While clearly discriminatory in the modern context, scholars generally consider this system to have been vastly more tolerant of religious minorities than anything comparable in the West during the same period.
During the nineteenth century, as the Ottomans faced challenges from their increasingly powerful European rivals, problems arose in their Mashriqi provinces. The European powers, competing with each other for colonial control across the globe, began to claim “protectorates” over the Ottoman Empire’s minority religious communities, especially its Christians, using this claim to leverage economic and strategic benefits for themselves vis-à-vis the declining Ottoman state. Despite some upheaval, the Arab provinces generally continued to regard the Ottoman Empire as a legitimate ruling power.
Oil was discovered in the Middle East in the first decade of the twentieth century. In 1911, the British navy, assuming it would be able to benefit from the reserves its geologists had found in modern-day Iraq, switched from coal- to oil-burning ships, thus ensuring the centrality of oil reserves in world politics. Around the same time, the scramble for new colonies among the European nations was reaching a frenzied state. During the First World War, European colonial competition resulted in a secret agreement between Britain and France partitioning the Mashriq in the event of Ottoman defeat. Under this 1916 pact, known as Sykes-Picot after its two principle negotiators, Britain would take control of the key Iraqi oil regions as well as strategic Palestine, and France would claim Lebanon and Syria. This agreement was formulated without the knowledge of either Ottoman or Arab representatives. Further, it appeared to conflict with an agreement the British made during the war with the Hashemite noble Sharif Hussein, in which they pledged to support an independent postwar Arab state over much of the same territory in return for local assistance against the Ottomans—a promise on which Hussein made good with his Arab Revolt in 1916. At the end of the First World War, the European powers who had already laid claim to parts of the Mashriq moved in to reap their rewards.
The newly formed League of Nations set up a system of “mandate” states in the Mashriq, which would theoretically progress towards independence under European guidance. In reality, the mandate system represented a thinly veiled colonial takeover. With Russia dropping its claims after the Bolshevik Revolution of 1917 and with U.S. support for self-determination seriously weakened by its limited role in the war and by Woodrow Wilson’s illness during the peace talks, Britain and France were free to divvy up the region at will. In 1920, the Treaty of Sèvres sketched the national borders of the new Middle East and chopped the Mashriq into separate national entities for the first time. The French took the new states of Syria and Lebanon, whose borders were drawn to ensure an unstable predominance of Maronite Christians who would have to depend on French colonial assistance to maintain political power. The British took Palestine and the new state of Iraq—an ahistorical amalgamation of the three disparate Ottoman provinces of Basra, Baghdad and Mosul. Two years later, due to the exigencies of European Zionist immigration and the claims of the Hashemite family, the British divided Palestine into two mandates: a much smaller Palestinian state and Transjordan (later Jordan). The basic map of the contemporary Mashriq had been drawn without reference to historical precedents or consultation of any kind with its inhabitants.
These borders remain the basis of the Mashriq’s nation-state system, most of whose members achieved independence by the late 1940s. The founding of the state of Israel in 1948 and the subsequent scattering of the Palestinian Arab population across the globe further cemented this Western-created system. France and Britain drew borders without considering whether the new states had the natural resources necessary to sustain themselves; in Syria, the borders were drawn deliberately to exclude the reserves of oil it needed for economic development. Consequently, all these nations have suffered from an impoverishment that has made the development of a functioning civil society virtually impossible. With the failure of the communist and socialist models that seemed the only path to economic development in the 1950s and 1960s, it has increasingly appeared that in the almost complete absence of economic opportunity, authoritarian rule is the only possible mode of government.
The West has generally not considered the economic unsustainability of the Mashriq a problem. After the withdrawal of the European imperial powers from the Middle East during the 1940s and 1950s, Western attention turned to the oil-rich Gulf. Intervention on behalf of Israel constitutes the only sustained American engagement in the Mashriq over the past sixty years. The United States has elected to ignore or downplay the underlying problems and potential of the Mashriq, instead focusing its efforts on currying favor with the Persian Gulf states that contain half the world’s oil reserves. Misguided American priorities aside, the borders drawn by the European powers have proven problematic in both economic and political terms, contributing to communal tensions, authoritarian rule, economic stagnation and political instability.
THERE WERE, of course, a number of protests over the arbitrary and often cruel division of the Mashriq. In Palestine and Syria, from 1918 through the early 1920s, a faction known as the “Southern Syria” movement (for the belief that Palestine constituted the southern part of Syria) argued against drawing random borders with the purpose of dividing the region between Britain and France. During the mandate itself, Antoun Saadeh, founder of the Syrian Social Nationalist Party, decried the division of the region and called for the unification of “Greater Syria.” He drew on emerging European nationalist—including fascist and totalitarian—philosophies to propose a new modern, secular and nonconformist state in the Mashriq.
As the mandate period came to an end, another ideology was emerging, one that would become the dominant political doctrine of the postwar Middle East. Pan-Arabism, which viewed the Arabic language as the central thread of a viable regional identity, gathered strength in the aftermath of the bloody independence battles and the postmandate political confusion. After 1948, pan-Arab leaders like Gamal Abdel Nasser staked their political lives on opposition to the Jewish state and declared Arab solidarity, stretching from North Africa through the Mashriq to the Gulf. The shifting of power in the Arab world led to the abandonment of “Greater Syria” in favor of a pan-Arabism devoted to a Soviet-facing economic philosophy and, of course, vitriolic objection to Israel’s existence.
Arab nationalism did not make good on its promises. The pan-Arab regimes that took over in Iraq, Syria and Egypt during the 1950s became just as corrupt as the elite-dominated governments they had overthrown. Pan-Arabism met its end in 1967, when a coalition of Arab states led by Nasser lost the Palestinian territories, Sinai and the Golan Heights to Israel in a humiliatingly quick and thorough military defeat. Henceforth, many in the Arab world would begin to feel that their only remaining option for a viable supranational political organization lay in the Islamist movements beginning to gather steam. Islamism gained a foothold because state and pan-Arab nationalisms had failed so dramatically.
Pan-Arabism and, later, Islamism attempted to deal with the traumatic loss of identity the Mashriq suffered in the aftermath of the First World War. The Arab provinces of the Ottoman Empire, once linked culturally, politically and economically, had been violently shattered and placed under oppressive and often brutal colonial regimes. These newer regional and religious conceptions of identity tried unsuccessfully to replace the sense of history, pride and belonging that had been destroyed by the violence of the early twentieth century. The region can be healed only by rejecting these failed attempts at constructing new alliances based on pan-Arabism and Islamism and, instead, focusing on reclaiming its vibrant, cosmopolitan, pre-1920 identity.
OFFICIAL AMERICAN discussions of the Mashriq seem to assume that the failure of democracy there derives from flaws in the civic culture or the divisions wrought by primitive sectarian identities. These mistaken conclusions, rooted in Europe’s misguided imperial division of the Mashriq, have led to recurring and costly interventions throughout the region—in Iraq and, more subtly, in Lebanon, Syria and Jordan—that have failed completely. Washington needs a new approach to decisively break this pattern.
The United States first needs to recognize the West’s role in creating the disastrous geopolitical situation in the Mashriq and unpack each state’s economic and political baggage. Priorities include: identifying each state’s natural-resource scarcities and the consequent political divisions; acknowledging the arbitrary borders that have fractured communities culturally, ethnically and religiously; and recognizing the psychological traumas and loss of identity that accompanied the forced remapping of the Mashriq.
Economic incapacity, caused by haphazard resource allocation in the aftermath of World War I, forms the core of the Mashriq’s political problems. In the case of Syria, the loss of oil-rich lands to Iraq was devastating; the cultivation of separately governed “statelets” severed producers from markets and splintered local communities; and the subsequent impoverishment of the people gave way to a minority regime that continues to rule the country today. The founding of tiny Lebanon, with a large population and almost no natural resources, resulted in perpetual dependency on remittances. The small state of Jordan continues to depend on Western financing to buttress its monarchy and maintain stability. Israel, the most economically successful of the lot, is not immune to these challenges. It has relied heavily on aid from the West since its founding and continues to require immense financial and military support from the United States. The Palestinians’ dire economic straits have reached a humanitarian boiling point—particularly in Gaza—a situation that inevitably fuels violence borne of desperation.
In 1945, six Arab countries—Egypt, Syria, Transjordan, Saudi Arabia, Lebanon and Yemen—undertook another ill-fated bid to unify when they came together to found the Arab League. The decision to base the institutions of pan-Arabism in Egypt signaled the organization’s orientation away from the Mashriq and towards North Africa and the Gulf—a focus that became even starker in 1979, when the capital of the Arab League was temporarily moved to Tunis as a consequence of Arab anger over the Egyptian-Israeli peace treaty.
The league provides a kind of sifting mechanism for the problems of the Arab world. The West works with and through the league as necessary and especially when it serves broader U.S. strategic interests, such as in the 1991 Gulf War. But the league has done very little to assist the nations of the Mashriq, and its record on the Palestine question (with the possible exception of the Saudi-led 2002 Arab Peace Initiative) is lackluster. The league’s approach to economic issues surrounding oil, as evinced by the 2006 decision to admit Venezuela as an observer, betrayed an increasingly muddled and distant agenda. It has, likewise, not achieved any significant degree of political or economic integration among its member states, which remain extremely disparate. The inability of the Arab League to solve or even begin to address the political, cultural and economic difficulties of the Mashriq reflects the failures of the Arab nationalist model. Given its legacy as a talk shop and showcase of Arab divisions—not to mention regional identities trending toward the local—the league is unlikely to emerge as a force for stability.
THE ONE part of the Levant that has captivated American policymakers is the state of Israel. Israel has enjoyed huge amounts of economic, political and military support from the United States, especially since its occupation of Palestinian territories after the 1967 war. U.S. administrations have expended exorbitant amounts of energy and resources in trying to negotiate a “peace process” intended to stabilize the region.
Such efforts have repeatedly fallen short, largely because they have not conceptualized the conflict within the Mashriq’s colonial history. Even if the Israelis and the Palestinians were to sign a peace deal, Israel’s hostile relations with its neighbors would continue to threaten its position. Any lasting solution must therefore also consider Israel as a central part of the Mashriq, recognize its cultural and historical importance to the history of the region, and offer it genuine economic and political integration. Successful economic exchange and development must be considered essential to any peace settlement.
This may seem like an unlikely scenario, especially in the face of arguments that the security barrier has allowed Israelis to relegate the ongoing conflict to a back-burner issue. But in fact, Israel has much to gain from regional economic and political integration. Such a solution would allow it to establish a lasting peace with the Palestinians as well as its Arab neighbors, especially Lebanon, with which Israel has been intermittently at war for the better part of three decades—a conflict that has taken an immense toll on the Israeli psyche as well as costing thousands of lives and billions of dollars. Integration for Peace would provide Israel with regional allies against its greatest foe, Iran, perhaps eventually building new strategic lines of communication with Tehran, and reinvigorating relations with Ankara. It also offers Israel the opportunity for major regional economic development, opening up huge new markets for Israeli goods and services. But above all, it represents an opportunity for the normalization of relations and the permanent legitimization of Israel in the eyes of its neighbors. The genuine acceptance of Israel as an economic partner of the Arab states of the Mashriq would enshrine a new regional order.
The states of the Mashriq must shift from outdated anti-Israel rhetoric, which served for so many years to prop up the failing institutions of Arab nationalism, and instead recognize Israel as a potential partner in a major economic redevelopment of the region. Integration for Peace offers the most promising path towards regional security and prosperity. This sort of cooperation could lead to sustainable partnerships between Israel and its Arab neighbors, a desirable outcome for U.S. national interests.
PIECEMEAL SOLUTIONS to the so-called “Middle East problem” have failed repeatedly. Israel’s peace treaties with Egypt and Jordan (reached at great financial and diplomatic cost to the United States) have reaped little in terms of broader integration. Menachem Begin and Anwar Sadat’s agreement, despite leading to a Nobel Peace Prize, failed to deliver a genuine peace between Israelis and Egyptians. Similarly structured individual peace arrangements with the Palestinians or with Israel’s two northern neighbors would likely suffer from the same tunnel vision.
The region has been in a state of cold war since the 1982 invasion of Lebanon, the last time that the Israeli army engaged another conventional force in limited war—in contrast with actions against nonstate actors like Hezbollah and Hamas. Israel has existed in a tense atmosphere for nearly three decades, facing down Syria, Lebanon and various Palestinian groups. The Camp David Accords, in retrospect, look more like an armistice than anything else; any additional piece-meal peace would be no different.
A Mashriq-wide peace process should supplant the “Land for Peace” approach with an Integration for Peace framework. Such a model would include land settlements between Israel and the Palestinians (based on pre-1967 borders), as well as among Israel, Lebanon and postwar Syria. Offering Israel a phased path to full integration in a Mashriq market could function as a catalyst.
The United States has proven incapable of advancing the Israeli cause in the post–Arab Spring landscape. But a war-weary America must play a role in reimagining the Mashriq. The incorporation of these countries into a single economic zone allowing the free movement of goods, services, labor and capital, based on a European Union–style single market, is the first step towards reclaiming an identity that was lost in the violent colonization of the Middle East.
Reimagining a new Mashriqi identity, based on a common history of cosmopolitanism and a commitment to a shared economic prosperity, is viable. Integration for Peace has pre–twentieth century antecedents and represents an alternative to the recent Islamist trend. It rejects the sectarianism that has come to characterize the Middle East (which developed primarily as a response to colonial and neocolonial legal and political systems), burying the concept of a Sunni-Shia divide in favor of a vision based on the region’s much longer history of tolerance and diversity. Far from presenting a threat to the United States, this new vision holds promise for a stable and productive Mashriq, with benefits for the Middle East as a whole.
The United States, though wounded by its invasion of Iraq and a damaged reputation throughout the Middle East, remains the only feasible mediator. But it must break from the pattern of trying to solve crises in isolation. The United States and Russia, whose role in Syria makes it an indispensable player, should initiate a combination of bilateral and multilateral tracks with the strict intention of discussing the region’s interlocking, inseparable crises holistically. These conversations would involve not only regional government officials, but would also engage leading intellectuals and economists to outline a path toward integration in the postwar decade. The endgame is integration.
The European Union, in spite of its many imperfections and uncertain future, offers a modern-day example of success in the wake of a disastrous conflict. In an era of tight budgets, a market-based approach offers an attractive alternative for reconstructing Iraq and Syria, creating jobs and bringing refugees home. The United States must seize the opportunity to reassert itself as an honest broker in the Mashriq—much as it did in postwar Europe. The seemingly endless stream of crises from Syria, Turkey and Iraq to the Israeli-Palestinian conflict demands a bold, new approach.
A renewed sense of collective identity based on shared economic interests may hold the key to healing a divided region desperately in need of a shared vision of a more peaceful and prosperous future.
Jamal Daniel is chairman of Crest Investment Company and founder and publisher of Al-Monitor, winner of the 2014 Free Media Pioneer Award.
Putin’s Strategy to Maintain Power
Aug. 11, 2016 The president needs to fix the economy to ensure support from the Russian people.
Recent political reshufflings in Russia highlight Russian President Vladimir Putin’s strategy, but also his constraints in governing the country. These moves have been his response to increasing protests in the regions outside the main cities, caused by poor economic conditions. Historically, regime change in Russia has been triggered by deteriorating economic and security conditions. Putin currently enjoys high approval ratings, but only because the population trusts him to come up with solutions to their problems.
· Russia’s economic dependence on hydrocarbon exports has created structural vulnerabilities. These became visible at the end of 2012 and have worsened as oil prices dropped. The government must address the urgent economic problems and consider structural reforms that can move the economy away from its dependence on energy exports.
· Two programs for relaunching the economy have been proposed, each with its own symbolism and political implications. Putin hasn’t chosen either one, so as not to create divisions, but said a combination of the two would work better.
· The Russian people have seen small to no real wage increase, pensions indexed below the inflation rate, unpaid wages and unemployment. Discontent and labor protests are growing in the regions, where people see oligarchs and regional officials as having mismanaged the economy.
· With the parliamentary elections coming up in September and the presidential election in 2018, Putin senses the danger of increased unrest. He has established a National Guard who report directly to his office. This, in tandem with the recent security and administration purges, is meant to ensure his control over the situation and keep his approval ratings high.
· Putin’s maneuverings also give us an opportunity to evaluate Putin’s strength. Putin needs to deliver what the people expect him to deliver. Though not quite a dictator, he is the most important political figure in Russia, which has historically needed a strong central figure. Putin is trying to be that figure, but Russia’s problems are serious and there are no easy solutions. As Russian economy weakens, so does Putin.
In 2017, Russia will mark the centennial of the October Revolution. In 2018, it will have a presidential election, in which President Vladimir Putin could run again. Putin is seen by most of the Western media as at least a dictator, if not as a czar, but dictatorships require absolute power. Russia’s current geopolitical and socio-economic reality has kept a true dictator from emerging, but Putin is the most important political figure and clearly a ruler. He needs to respond to the Russian people’s problems and keep the country running.
Putin is using arrests, raids, resignations and political reshufflings to boost his position and appease the Russian public ahead of next month’s parliamentary elections. While Russia is facing many challenges, Putin’s regime is under consolidation.
The raids, arrests, forced resignations and reshufflings during the last few months are related to Putin’s strategy. He is not in immediate danger of losing control, but he is trying to consolidate and bolster his power, while addressing the major concerns of Russian society. The moves also highlight Putin’s constraints. None of the measures taken indicate the Kremlin has a radical approach to solve the socio-economic problems.
Putin’s latest approval ratings are high – more than 80 percent of the population supports his actions. But the approval rate for regional governors has been below 50 percent since the end of 2014, according to Levada Center, an independent Russia-based polling organization. With the presidential election in 2018, Putin needs support in the Duma for the next two years. To get support in the Duma, he needs to make sure that his United Russia Party wins the September parliamentary elections.
In September 2015, a different Levada poll listed the management of the economy and the fight against corruption as major failures for Putin. So to hold on to power after 2018, he needs to tackle corruption and address the economic challenges.
Tackling Russia’s Economic Problems
Russia’s economic problems start with the economy’s structure. The country’s budget is heavily dependent on revenue from hydrocarbon exports. Low oil prices have had dramatic effects, especially since the country hasn’t managed to fully recover from the 2008 recession. In 2013, the economy only grew by 1.3 percent, even though the price of oil was around $110. During the 2000s, energy industry profits generally came from state-led investment projects and increases in pensions and wages, which caused consumption to grow.
There was little to no investment in industrial diversification and almost no investment in increasing efficiency or new technology. Therefore, signs of stagnation started appearing in late 2012. But the people’s expectations were different: considering the political discourse and the fading of the 2008 crisis, most expected growth. With no real growth in wages or pensions over the last two years and the poverty level increasing, Russians’ pessimism and appetite for protests grew instead.
Russia’s 2016 budget was built around oil prices averaging $50 per barrel and the deficit target was set at 3 percent. The drop in oil prices means a rising deficit. Since it can’t control the price of oil, Russia needs to find other ways to manage its finances. So far this has included cuts in government spending (except in defense and social services) and privatization plans for some state-owned companies.
But the steps taken haven’t addressed the weakening socio-economic conditions. Russia’s GDP per capita is down from an all-time high of $11,615 in 2013 to $11,038 in 2015. More than 2 million people fell into poverty in 2015. About 19 million Russians, or 13.4 percent of the population, lived below the poverty line ($139 or 9,452 roubles a month), according to the Russian government.
Inflation has been the most worrying indicator. Real wages fell by 9 percent in 2015 and 4 percent in 2014. Inflation fell from 12.9 percent in December 2015 to 7.4 percent in March 2016. As inflation dropped, the central bank resisted calls to cut the interest rate as nominal wages rose more than 5 percent in the first quarter, exceeding the rate of inflation for the first time since 2014. The government announced that pensions would increase by 4 percent in February 2017 and that they will be indexed to inflation starting in 2017.
Concerns over rising inflation are still looming. On Aug. 4, Putin advised people to get a mortgage loan now rather than wait for lower interest rates, citing “inflationary pressures” on the economy. Then on Aug. 6, Prime Minister Dmitry Medvedev said, “When faced with questions of what we should do with wages and pensions, the economic model takes a back seat, and we are forced to take decisions simply so as not to let the economy go into free fall.”
On June 10, on a visit to Crimea, Medvedev told a pensioner complaining about a small pension, “There simply isn’t any money.” This is the main reason Putin said people should get mortgages now, to create more liquidity in the economy. Pumping money and optimism into the economy is urgent for Putin, but further measures are needed to address the country’s complex economic problems.
Since the beginning of the year, there have been discussions about the best way to fix these problems. Three potential programs were presented during the May 25 meeting of the Economic Council. The Economy Ministry’s plan looks at ways to cut down consumption through labor legislation reforms – allowing companies to lay off workers for economic reasons, limiting salary growth and transforming revenues into investments, especially in the state-owned sector. Such a program would only work in a planned economy. This was a solution the Soviet Union used during the first half of the 20th century, when resources were allocated to develop the country’s industry at the expense of private consumption.
The other two programs were presented by two groups, one led by former Finance Minister Alexei Kudrin and one called Stolypin Club, chaired by Boris Titov, who has been the commissioner for entrepreneurs’ rights since the creation of the post in 2012. Kudrin served as finance minister from 2000 to 2011 and is known for his liberal yet cautious macroeconomic reforms, guiding Russia out of the 2008 financial crisis. He is seen as an outspoken pro-market reformer who could effectively counter the security services personnel in Putin’s inner circle – the siloviki.
Kudrin’s return to government in April 2016 is not accidental. He was named the deputy chief of the Economic Council, which gave the Kremlin the support of Russian liberals. Titov is less known to the public. The club he chairs is named after young reformist Prime Minister Pyotr Stolypin, who served under Czar Nicholas II. Stolypin’s skill at controlling insurrection led Nicholas II to appoint him prime minister in 1906. He was assassinated in 1911, but remained the last hope for czarist Russia to avert the 1917 revolution. Stolypin Club includes personalities like presidential adviser Sergei Glazyev and Andrei Nikolaevich Klepach, former deputy minister of economics and now deputy chairman of VEB Bank’s board of directors.
The program proposed by Stolypin Club advocates for increased investment based on monetarist principles: budgetary help and printing money. The Stolypins support a “quantitative easing” policy and suggest issuing special bonds for 1.5 trillion rubles ($22.5 billion) to refinance the banking system. It also proposes the country abandon the floating exchange rate regime currently underway in Russia and impose selective exchange controls aimed at reducing the impact of speculative capital on the exchange rate.
Kudrin’s program promotes measures supporting investment growth through favoring small private business and reforming the justice and law enforcement sectors.
Putin basically had to choose between Kudrin’s “Plan K” and the Stolypin Club proposal. On July 8, Medvedev hinted that the Kremlin preferred Plan K, announcing that Russia will introduce a preferential tax regime. This topic has been taboo since Putin took power, when he implemented the “Gref Plan” – which introduced a flat tax regime (13 percent income tax and 24 percent on corporate profits), in line with the energy-fueled economy.
No specific details were given on the new tax regime, but Medvedev said that real wages will be maintained at their current levels and allowed to increase slowly in line with economic growth. This is directly from Kudrin’s Plan K, which attempts to switch the growth driver from consumption to investment. Reports in the Russian media have also hinted at a radical reduction in insurance premiums with a complementary increase in the VAT as well as the introduction of special tax exemptions for strategically innovative industries. Putin highlighted Russia’s need for these exemptions in his recent speech at the St. Petersburg International Economic Forum.
But on July 29, it was reported that Putin wants both Plan K and the Stolypin program to be considered as solutions for the economic crisis. Opting for a combination of the two highlights his careful maneuvering, which confirms the weak state of the Russian economy and Putin’s political constraints.
Both programs have political implications. Kudrin is supported by the Russian liberals and reformists, while Titov is one of the Party of Growth leaders. The Party of Growth is seen as pro-Kremlin, but the symbolism attached to the Stolypin name should not be ignored. Moreover, as economic problems affect social stability, Putin needs to politically maneuver to buy time to test which of the proposed measures will work.
No one but Putin will be the savior – Kudrin and the Stolypin Club will not get credit for getting Russia through this crisis. But if something goes wrong, he can blame them. This way, he is not only finding solutions to fix Russia’s economy, but consolidating his position as well.
Russia’s Political and Economic Transition
Russia’s economic development has not been linear since the end of the Cold War. The 1990s delivered little in terms of a growth platform – most of the reforms were aimed at keeping the country from sliding back into communist rule. Most of the population remained at the poverty line and most state enterprises were privatized at heavily discounted valuations.
The default crisis in 1998 and the protests of tens of thousands in the late 1990s brought about regime change. The population was ready for stronger government and welcomed a stronger ruler. Putin’s platform was to fix the economy first and then start political reform. Since then, Russia’s development has been based on energy exports, which in turn fueled budget spending and consumption.
The financial sector experienced the most reforms, with a booming credit industry. Putin didn’t abandon control over the economy, even if he didn’t have it completely. His solution was to support a two-tier economic system: he controls one tier through his “inner circle” that runs state-owned companies, while the other tier is subject to free market laws. These state-run companies make up about one-fifth of the economy, which ensures that any Kremlin reforms are implemented.
But the Russian people trust Putin, not necessarily his appointees. They regard both the oligarchs running the companies and the regional administration as corrupt. So Putin needs to balance between these perceptions and come up with the right mix of policies for preserving stability. This is of particular importance in times of crisis when a few disenfranchised employees can quickly turn into wider popular unrest.
Russia’s economic problems have not only decreased GDP per capita, but also increased unpaid wages, which were the main reason for more than 50 percent of the protests in 2016. Labor protests have been growing since 2014, according to the Russian Center for Social and Labor Rights. While the scale of protests is not comparable to the 1990s, most of the protests focus on local economic demands.
While there has been a decline in the number of protests in big cities, protests in small cities have increased by 40 percent in the last year, according to the Federation of Independent Trade Unions of Russia (FNPR), Russia’s largest workers’ association. The number of regions involved in protests has also grown. Furthermore, in 2015, FNPR reported the growth of interregional protests through so-called solidarity protests. Besides labor protests, Russia has recently seen protests related to different economic causes – the truck drivers’ protests have essentially been taxpayers’ protests.
In addition to the economy, the protests are also tackling corruption, which is seen as one of the main causes of inefficiency. The oligarchs around Putin are seen as above the law. The system he created is about the Kremlin interfering directly in the economy. This is a system that, while not designed to be corrupt, encourages rent seeking and corruption through the non-competitive way state-directed lending is carried out.
Considering that 2016 is an election year and 2018 is just around the corner, Putin understands the urgency of implementing measures to stop protests at the regional level. While he needs to maintain control over the economy in order to make sure reform plans are successfully implemented, he also needs to address corruption. Both the economic and the corruption problems are strategic and need to be addressed in the medium and long term. Winning the elections is a short-term concern. This is why Putin has been working to build up support in the regions while also addressing economic problems.
The Russian Social Contract Redefined
Just a day before announcing that he wants to combine the two economic reform programs, Putin signed off on a government reshuffle of federal district bosses, regional governors and state-owned company bosses. Putin also reshuffled the presidential envoys to several federal districts.
This surprised most. However, it is all but surprising. The reshuffle came as a lower-level anti-corruption drive has been gathering momentum, with at least three regional governors investigated for taking bribes and several senior officials put under investigation or arrested. It also comes along with a restructuring of the security apparatus, which began earlier in the year as a result of increasing tensions within Russia.
On April 5, Putin announced the formation of the National Guard troops, unifying several domestic security forces and bringing them under the direct control of the president. The troops’ listed functions are protecting the public order, countering extremism, guarding government cargo and facilities, assisting with border protection, fighting terrorism and controlling the arms trade.
The head of the new law enforcement body is Putin’s ex-personal bodyguard Viktor Zolotov. On April 30, the same day that Kudrin was appointed deputy chairman of the Economic Council, the Kremlin announced a major reshuffle of the security services, including the FSB, the main security agency in Russia.
Eight high-ranking law enforcement officials were fired, including regional officials. Some of the firings were reportedly related to corruption and other public wrongdoings. The same day, Putin appointed Igor Krasnov, who investigated the killing of opposition politician Boris Nemtsov, as deputy head of the Investigations Committee.
The Investigation Committee is the Russian version of the American “Untouchables,” a key law enforcement agency. Krasnov uncovered large bribes paid to high-placed officials in the committee – including the deputy branch chief Denis Nikandrov, head of its Internal Security Directorate Mikhail Maximenko and his deputy Alexander Lamonov – who have been arrested. The charges relate to a $1 million payment – the first tranche of a $5 million bribe from notorious gangster Zakhari Kalashov.
In May, reshuffling of security institutions continued, as top officials of the Federal Protection Service (FSO) and the Foreign Intelligence Service (SVR) were replaced. June saw changes in the FSB directorates and ended with the rather dramatic purge of 50 senior officers of the Baltic Fleet, including fleet commander Vice Adm. Viktor Kravchuk and chief of staff Rear Adm. Sergei Popov.
These purges only set the stage for the July purges, which were much more public. Putin appointed Sergei Korolev as head of the FSB Economic Security Service, replacing Yuri Yakovlev. This department investigates financial crime and corruption in Russia. This has shown that Putin is determined to clean house and effectively fight corruption.
In early August, the longtime head of Russia’s Federal Customs Service, Andrei Belyaninov (said to have been one of Putin’s close friends), was arrested after his home was raided by the Investigation Committee and the FSB. The investigations and attacks are coming from the FSB, run by Putin loyalist Alexander Bortnikov and backed by the newly appointed Korolev. Putin appears to be behind all the reshuffling, leading the public to see that he is serious in fighting corruption. However, the anti-corruption drive is not only a stunt for election season. It is also an opportunity for Putin to put people he trusts in key positions within the national security apparatus.
Putin not only needs to maintain control, but also to show the people he is responding to their outrage. Protests in the regions could be threatening in the long term. To have full control, Putin has established the National Guard and appointed people he fully trusts to high-level security positions. This way he controls two essential processes: getting intelligence on potential unrest in the regions and ending any eventual protests.
Russian history proves that while Russians can indeed endure a lot, labor unrest and thwarted expectations can lead to regime change. The 1990s taught Putin that the people’s trust is the most important asset a leader can have in Russia, even if it is built on a set of rigid rules that are also meant to inspire fear. Trust is taken away only by pessimism – when people’s expectations are not met and they perceive security to have weakened.
This is why security forces are key to maintaining order. Putin also understands that there are certain limits that need to be respected. Russian history, again, offers lessons on that as well. The industrialization crisis of the 19th century ended in the oppression of the poor working class. Then when soldiers fired on a peaceful march, hoping to present a loyal petition to the czar, it triggered the 1905 Revolution – a wave of nationwide local unrest, which was a precursor to the 1917 Revolution.
Just as in 1905, people expect the central political figure in Russia to solve their problems. In the regions dominated by single industries, unpaid wages and unemployment are increasing. The people hold the local authorities and elites responsible. Considering the polls, they are hoping Putin will step up and fight corruption and push money and contracts their way.
With the latest corruption cases and reshuffling, Putin is rewriting the social contract in Russia and telling the elites that corruption and incompetence will be less acceptable, considering the current problems. While the elites are clearly disappointed, Putin’s strategy is to gain support from the public and this has been endorsed regionally by the newly appointed officials, who will surely oversee peaceful elections in which United Russia wins the most seats in the Duma.
Russian history offers a lot of lessons on the danger of increasing divisions between the elite and the rest of the population. To control the effect of the economic problems on society, the Kremlin needs to get reliable information on potential unrest and have the means to limit such unrest.
The creation of the National Guard early this year gave the Kremlin direct access to many towns that do not have an interior troop garrison. This adds to the effect of reshuffling the regional administration. A local official who gives the Kremlin what he thinks the Kremlin wants to see, rather than what is necessary, can no longer take the matter into his own hands because Moscow will be informed.
Technology has made information more accessible, even in rural Russia, and increased its sense of political activity. What has not changed is the fact that Russia has always looked to a central figure, trusting that the leader has the solutions. As problems get more difficult, solutions become more complex and involve a lot of maneuvering. This, in turn, weakens the Russian ruler. This has been true in Russia before, and Putin is no exception.
*Herausgegeben von Udo von Massenbach, Bärbel Freudenberg-Pilster, Joerg Barandat*