Russia missing from Trump’s top defense priorities

http://foreignpolicy.com/2016/12/20/russia-missing-from-trumps-top-defense-priorities-according-to-dod-memo/?wp_login_redirect=0

Pentagon memo outlining the incoming Trump administration’s top “defense priorities” identifies defeating the Islamic State, eliminating budget caps, developing a new cybersecurity strategy, and finding greater efficiencies as the president-elect’s primary concerns. But the memo, obtained by Foreign Policy, does not include any mention of Russia, which has been identified by senior military officials as the No. 1 threat to the United States.

“People there now would be pretty concerned to see Russia not on the list,” said Evelyn Farkas, a former senior Pentagon official who worked on Russia policy before leaving in 2015.

For years, top cabinet officials at the Defense Department and the intelligence community cited Russia as the foremost threat because of its vast nuclear arsenal, sophisticated cyber capabilities, recently modernized military, and willingness to challenge the United States and its allies in the Middle East, Eastern Europe, and other regions.

Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, who will remain in that role after Trump takes office Jan. 20, told Congress last year that no other threat is more serious.

“If you want to talk about a nation that could pose an existential threat to the United States, I’d have to point to Russia,” Dunford told the Senate Foreign Relations Committee. “If you look at their behavior, it’s nothing short of alarming.” He listed China, North Korea, and the Islamic State as the next biggest threats, in that order.

The memo, dated Dec. 1, was written by Acting Undersecretary of Defense for Policy Brian McKeon to employees in his office. In it, McKeon said the four-point list of priorities was conveyed to him by Mira Ricardel, a former Bush administration official and co-leader of Trump’s Pentagon transition team.

screen-shot-2016-12-20-at-12-27-56-pm

The full memo is here.

*cough* manchurian

lol how the fuck is Russia the number one threat to this country?

Gov'ment tryna invent a boogyman again.

Why does he want to increase defense spending when we are broke? If your main goal is kill ISIS and cyber defense that doesn't require an increase in budget.

That's because Trump is trying to do a reverse-Nixon

He wants America and Russia to align against China.

Also China is a far greater threat than Russia.

China is the #2 GDP trying to toppled the US.

How is Russia the #1 threat to the US?

Russia is the #1 threat currently due to it being a mostly white Christian nation. Can't have that.

 

http://www.economist.com/news/leaders/21709028-how-contain-vladimir-putins-deadly-dysfunctional-empire-threat-russia

The threat from Russia

How to contain Vladimir Putin’s deadly, dysfunctional empire

Oct 22nd 2016

FOUR years ago Mitt Romney, then a Republican candidate, said that Russia was America’s “number-one geopolitical foe”. Barack Obama, among others, mocked this hilarious gaffe: “The 1980s are now calling to ask for their foreign policy back, because the cold war’s been over for 20 years,” scoffed the president. How times change. With Russia hacking the American election, presiding over mass slaughter in Syria, annexing Crimea and talking casually about using nuclear weapons, Mr Romney’s view has become conventional wisdom. Almost the only American to dissent from it is today’s Republican nominee, Donald Trump.

Every week Vladimir Putin, Russia’s president, finds new ways to scare the world. Recently he moved nuclear-capable missiles close to Poland and Lithuania. This week he sent an aircraft-carrier group down the North Sea and the English Channel. He has threatened to shoot down any American plane that attacks the forces of Syria’s despot, Bashar al-Assad. Russia’s UN envoy has said that relations with America are at their tensest in 40 years. Russian television news is full of ballistic missiles and bomb shelters. “Impudent behaviour” might have “nuclear consequences”, warns Dmitry Kiselev, Mr Putin’s propagandist-in-chief—who goes on to cite Mr Putin’s words that “If a fight is inevitable, you have to strike first.”

In fact, Russia is not about to go to war with America. Much of its language is no more than bluster. But it does pose a threat to stability and order. And the first step to answering that threat is to understand that Russian belligerence is not a sign of resurgence, but of a chronic, debilitating weakness.

Vlad the invader

As our special report this week sets out, Russia confronts grave problems in its economy, politics and society. Its population is ageing and is expected to shrink by 10% by 2050. An attempt to use the windfall from the commodity boom to modernise the state and its economy fell flat. Instead Mr Putin has presided over a huge increase in government: between 2005 and 2015, the share of Russian GDP that comes from public spending and state-controlled firms rose from 35% to 70%. Having grown by 7% a year at the start of Mr Putin’s reign, the economy is now shrinking. Sanctions are partly to blame, but corruption and a fall in the price of oil matter more. The Kremlin decides who gets rich and stays that way. Vladimir Yevtushenkov, a Russian tycoon, was detained for three months in 2014. When he emerged, he had surrendered his oil company.

Mr Putin has sought to offset vulnerability at home with aggression abroad. With their mass protests after election-rigging in 2011-12, Russia’s sophisticated urban middle classes showed that they yearn for a modern state. When the oil price was high, Mr Putin could resist them by buying support. Now he shores up his power by waging foreign wars and using his propaganda tools to whip up nationalism. He is wary of giving any ground to Western ideas because Russia’s political system, though adept at repression, is brittle. Institutions that would underpin a prosperous Russia, such as the rule of law, free media, democracy and open competition, pose an existential threat to Mr Putin’s rotten state.

For much of his time in office Mr Obama has assumed that, because Russia is a declining power, he need not pay it much heed. Yet a weak, insecure, unpredictable country with nuclear weapons is dangerous—more so, in some ways, even than the Soviet Union was. Unlike Soviet leaders after Stalin, Mr Putin rules alone, unchecked by a Politburo or by having witnessed the second world war’s devastation. He could remain in charge for years to come. Age is unlikely to mellow him. 

Mr Obama increasingly says the right things about Putinism—he sounded reasonably tough during a press conference this week—but Mr Putin has learned that he can defy America and come out on top. Mild Western sanctions make ordinary Russians worse off, but they also give the people an enemy to unite against, and Mr Putin something to blame for the economic damage caused by his own policies.

Ivan the bearable

What should the West do? Time is on its side. A declining power needs containing until it is eventually overrun by its own contradictions—even as the urge to lash out remains.

Because the danger is of miscalculation and unchecked escalation, America must continue to engage in direct talks with Mr Putin even, as today, when the experience is dispiriting. Success is not measured by breakthroughs and ceasefires—welcome as those would be in a country as benighted as Syria—but by lowering the chances of a Russian blunder.

Nuclear miscalculation would be the worst kind of all. Hence the talks need to include nuclear-arms control as well as improved military-to-military relations, in the hope that nuclear weapons can be kept separate from other issues, as they were in Soviet times. That will be hard because, as Russia declines, it will see its nuclear arsenal as an enduring advantage.

Another area of dispute will be Russia’s near abroad. Ukraine shows how Mr Putin seeks to destabilise countries as a way to stop them drifting out of Russia’s orbit (see article). America’s next president must declare that, contrary to what Mr Trump has said, if Russia uses such tactics against a NATO member, such as Latvia or Estonia, the alliance will treat it as an attack on them all. Separately the West needs to make it clear that, if Russia engages in large-scale aggression against non-NATO allies, such as Georgia and Ukraine, it reserves the right to arm them.

Above all the West needs to keep its head. Russian interference in America’s presidential election merits measured retaliation. But the West can withstand such “active measures”. Russia does not pretend to offer the world an attractive ideology or vision. Instead its propaganda aims to discredit and erode universal liberal values by nurturing the idea that the West is just as corrupt as Russia, and that its political system is just as rigged. It wants to create a divided West that has lost faith in its ability to shape the world. In response, the West should be united and firm.

War mongering propaganda. I don't agree with trump on much but his 'friendship' with Putin is ok in my book. 

Ask any American before Obama was elected how big of a threat to America they considered Russia, it would be really low. Shit even like 5 years ago I wouldn't even think of them when talking about threats. 

TzTinkle - Why does he want to increase defense spending when we are broke? If your main goal is kill ISIS and cyber defense that doesn't require an increase in budget.


And why does he want to increase defense spending when he wants to be isolationist and pull out of all these other countries and all these wars?

http://www.economist.com/news/special-report/21708879-when-soviet-union-collapsed-25-years-ago-russia-looked-set-become-free-market

Russia

Inside the bear

When the Soviet Union collapsed 25 years ago, Russia looked set to become a free-market democracy. Arkady Ostrovsky explains why that did not happen, and how much of it is Mr Putin’s fault

Oct 22nd 2016

ON AUGUST 20th Guzel Semenova, a 25-year-old Muscovite, was strolling through the grounds of Muzeon, one of the city’s parks, and stopped by a burnt-out, rusty trolleybus. Inside its shattered interior a small video screen was playing black-and-white footage of events that unfolded in the year she was born. A volunteer explained that the trolleybus had been part of an anti-tank barricade during a coup 25 years ago and symbolised the people’s victory. Ms Semenova looked confused. The 22-year-old volunteer, herself unsure what exactly had happened during those three days in August 1991, said it was when “Russia became free.” Ms Semenova listened politely, then walked on.

A patchy knowledge of those events is nothing unusual in Russia. A survey by the Levada Centre, the country’s leading independent pollster, shows that half the overall population and as many as 90% of young Russians know nothing about the drama that began in the small hours of August 19th 1991. 

That morning the world woke up to news of a coup. Mikhail Gorbachev, the last Soviet leader, was detained in Crimea, “unable, for health reasons, to perform his duties”. Power had been seized by a group of hard-line Communists, the chief of the KGB and senior army generals, who declared a state of emergency. Tanks were rumbling through the centre of Moscow. The television, overrun by the KGB’s special forces, was playing Tchaikovsky’s “Swan Lake” on a loop. It was a last, desperate attempt to save the disintegrating empire.

But on the day of the coup not a soul came out to support the Soviet regime. Instead, tens of thousands of Muscovites took to the streets to build barricades and defend their new freedoms. Boris Yeltsin, the first democratically elected president of Russia, then a subordinate part of the Soviet Union, called for resistance. The KGB’s special forces were told to attack the Russian parliament, the epicentre of the opposition, but nobody was prepared to give a written order. Two days later three young men died under a tank. A few hours after that the troops were withdrawn and Gorbachev returned to Moscow. Jubilant crowds marched to the KGB’s headquarters and toppled the statue of its founder, Felix Dzerzhinsky.

Those three days marked the end of the Soviet Union, but they did not become a foundation myth for a new Russia. The country was tired of myths. Modern school textbooks barely mention them. Russian officials used to lay flowers at a small monument to the three young men killed by the tanks, but even this modest gesture stopped in 2004. This year liberals were banned from marching to the place of their victory 25 years ago. The small festival at the Muzeon attracted a few hundred people who watched a stylised performance of “Swan Lake” and a documentary from those days. Shot in St Petersburg, the cradle of the Bolshevik revolution, it showed a vast, peaceful crowd in the main square watching the death throes of the Soviet empire. The camera also captured a young Vladimir Putin by the side of his boss, Anatoly Sobchak, then the mayor of St Petersburg, who had defied the coup. A demonstrator was heard to shout: “When we get rid of the communist plague, we will again become free and we won’t have to fight [a war] again.”

The revolution of 1991 overturned the Soviet Union’s political, economic and social order and put 15 countries on the map where there had previously been only one. But like many revolutions in history, it was followed by a restoration.

The tsar the Kremlin most admires is Alexander III, who on taking office in 1881 reversed the liberalisation overseen by his father, who was assassinated, to impose an official ideology of Orthodoxy, nationalism and autocracy. His portrait and his famous saying, “Russia has only two allies: its army and its navy,” greet visitors to a revamped museum of Russian history at VDNKH, a prime example of Stalinist architecture in Moscow. Stalin himself has had a makeover too. Gigantic portraits of him line the roads in Crimea, proclaiming: “It is our victory!”

The two main pillars of the Soviet state, propaganda and the threat of repression, have been restored. The KGB, which was humiliated and broken up in the aftermath of the coup, has been rebuilt as the main vehicle for political and economic power. The secret police is once again jailing protesters and harassing civil activists. In September the Kremlin designated the Levada Centre a “foreign agent”, which could be the end of it. Television has been made into a venomous propaganda machine that encourages people to fight “national traitors” and “fifth-columnists”. Boris Nemtsov, a liberal politician who once represented Russia’s hopes of becoming a “normal” country, was murdered outside the Kremlin last year.

After nearly a decade of economic growth spurred by the market reforms of the 1990s and by rising oil prices, the Russian economy has descended into Soviet-era stagnation. Competition has been stifled and the state’s share in the economy has doubled. The military-industrial complex—the core of the Soviet economy—is once again seen as the engine of growth. Alternative power centres have been eliminated. Post-Soviet federalism has been emasculated, turning Russia into a unitary state.

Reactionary restoration at home has led to aggression abroad. Russia has invaded Georgia and Ukraine, two of the most democratic former Soviet republics. It has intervened in the conflict in Syria, propping up the regime of President Bashar al-Assad. It has attempted to undermine Euro-Atlantic institutions, backed right-wing parties in Europe and tried to meddle in America’s presidential election. And it is once again using the threat of nuclear arms to blackmail the West.

After the defeat of the 1991 coup, Russia was widely expected to become a Westernised, democratic, free-market country. This special report will explain why that did not happen, and ask whether the West has a Putin problem or a much deeper and more enduring Russia problem.

Mr Putin was originally chosen for the top job by Yeltsin, Russia’s first president, not least for being on the “democratic” side in 1991. When he came to power in 2000, he was expected to consolidate the country. Instead, he has reinstated an archaic model of the state.

It was naive to expect that after 74 years of Soviet rule, and several centuries of paternalism before that, Russia would rapidly emerge as a functioning Western-style democracy. But this report will show that Russia’s relapse into an authoritarian corporate state was not inevitable. It was the result of the choices made by the country’s elite at each new fork in the road. And although those choices cannot be unmade, they do not predetermine the future.

 

Not the Soviet Union

The collapse of the Soviet Union brought a massive change to Russia. The creation of private ownership launched industries that did not exist before, such as private banks, restaurants and mobile-phone networks. People are free to make money, consume and travel on a scale never seen before in Russia’s history. They consume not just more goods and services but more culture and information. The state no longer dominates people’s lives. Although it controls television, the internet remains largely unconstrained everywhere, and radio and print still have some freedom. Even Alexei Navalny, an opposition politician, admits that “despite the curtailing of political and civil freedoms, the past 25 years have been the freest in Russian history.”

People are becoming increasingly alienated from politics, as demonstrated by the low turnout in the parliamentary elections in September, but they are finding other ways of expressing their views. Although few Russians remember quite how the Soviet regime ended, many enjoy the results. Russia has a vibrant urban middle class which, until recently, was richer than its equivalents in eastern Europe. Russia’s cities, with their cafés, cycle lanes and shopping streets, don’t look very different from their European counterparts.

A new generation of Westernised Russians born since the end of the Soviet Union has come of age. The children of the Soviet intelligentsia—a vast educated professional class that supported Gorbachev—dress, eat and behave differently from their parents’ generation. They have a spring in their step.

Many of these young, educated Russians owe their comfortable lives to a decade of economic growth that began in 1998 and ended with the economic crisis in 2008-09. The impact of that crisis exposed the limits of Mr Putin’s model of governance. And although economic growth recovered fairly quickly, trust in Mr Putin’s model of governance declined sharply, from 35% at the end of 2008 to 20% in early 2012, whereas support for Western-style democracy shot up from 15% to 30%.

Those who felt that Russia needed both economic and political modernisation pinned their hopes on Dmitry Medvedev, who served as president from 2008 to 2012. The Russian elite wanted him to stay for a second term, but in September 2011 he announced that Mr Putin, who was then prime minister, would resume the presidency, while Mr Medvedev would become prime minister. He indicated that this job swap had been planned right from the start of his presidency. Many people felt they had been duped. When three months later the Kremlin blatantly rigged the parliamentary elections, they took to the streets, demanding the same sort of respect from the state as citizens as they were enjoying as private customers at home and abroad. They wanted Russia to become a European-style nation state, an idea formulated by Alexey Navalny, an anti-corruption blogger who had galvanised the protests through social media. His definition of the governing United Russia as a party of “crooks and thieves”, and the mood of protest, spread across the country.

Mr Putin was rattled and angry, but having witnessed the failure of the 1991 coup he knew that tanks were not the answer. Instead he trumped civic nationalism with the centuries-old idea of imperial or state nationalism, offering the idea of Russia as a besieged fortress. In 2014 he annexed Crimea. The tactic worked. The protests stopped and Mr Putin’s personal approval ratings shot up from 60% to 80%. By attacking Ukraine after its own revolution in 2014, Mr Putin persuaded his country and its neighbours that any revolt against the regime would be followed by bloodshed and chaos.

Mr Putin’s Russia is a slippery construct in which simulation and bluff play a big part

Smoke and mirrors

The Soviet Union had many faults, but postmodernism was not one of them. Mr Putin’s Russia is a more slippery construct in which simulation and bluff play a big part. Nothing is what it seems. Elections are held not to change power but to retain it; licensed “opposition” parties are manufactured by the Kremlin; Mr Medvedev’s modernisation was an illusion; doctorates awarded to scores of Russian officials, governors and even to Mr Putin himself were based on plagiarism or cheating, according to Dissernet, a grassroots organisation.

In 2014 Russia put on a remarkable show with the costliest winter Olympics ever staged, in Sochi on the Black Sea. The host country’s athletes got the largest number of gold medals, not least thanks to a massive doping operation in which the Federal Security Service (FSB), the KGB’s successor and Russia’s main security organisation, swapped urine samples through a hole in the wall between an official laboratory and a secret one next door. (That caused many Russian athletes to be banned from this year’s Rio Olympics.) In the same way that Russia has been doping its athletes, its state media have been doping the population with military triumphs and anti-American propaganda, conveying an artificial sense of strength. But unlike those sport victories, Russian violence in Ukraine and Syria is real enough.

Mr Putin’s restoration project is working because the disintegration of the Soviet Union was not complete. The remains of the Soviet and even pre-Soviet system, its institutions, economic structure and social practices, which lay dormant during the first post-Soviet decade, have been revived and strengthened by the current regime.

But just as the Soviet and pre-Soviet legacies cannot be erased, nor can the quarter-century since the USSR ceased to exist. The fundamental conflict between a modern lifestyle and the political restoration under Mr Putin, exposed by the protests of 2011-12, has been suppressed, not resolved. No restoration has ever ended in a return to the past, and none has been permanent.

Russia, perhaps more than other countries, advances through generational shifts. The current reactionary phase may turn out to be no more than a detour on the path towards a modern, federalist nation state. Or it could lead to further decline, interspersed with outbursts of aggression. Which is it to be?

look deeper my frenz..don't just blindly adopt the positions and the rhetoric from our leaders; dive a little deeper into a subject so we can make up our own minds on how to feel about Russia (or any other country). that's real freedom and that's power. otherwise, how are we any different than robots?

http://www.economist.com/news/special-report/21708876-political-reform-essential-prerequisite-flourishing-economy-milk-without

The economy

Milk without the cow

Political reform is an essential prerequisite to a flourishing economy

Oct 22nd 2016

No oil, no spoils

JUST ACROSS THE mighty Volga river from Sviyazhsk, an island fortress built by Ivan the Terrible in 1552 to help him conquer the Khanate of Kazan, stands a brand new city. It is the first to appear on Russia’s map since the fall of the Soviet Union. Innopolis, 820km (510 miles) due east of Moscow, was founded in 2012 as an IT park and a model for the sort of modernisation that Dmitry Medvedev, Russia’s prime minister and before that its president, had proclaimed a main priority. Now two years old, it is the smallest town in Russia, with the large ambition to launch the country into a high-tech era. Designed by Liu Thai Ker, the chief architect of Singapore, it has a university where 350 students are taught in English. Just half an hour’s drive away is Kazan, the capital of Tatarstan, an oil-rich republic that has recently adopted a new 15-year strategy to turn itself into a hub of creativity and growth. “We are competing not with Russian regions but with the world. Our new oil is human capital,” says Vladimir Gritskikh, a former physicist who co-ordinates the programme.

Innopolis has comfortable town houses, playgrounds with Wi-Fi and a large swimming pool. Igor Nosov, its manager, holds an American MBA. The city’s free economic zone is dominated by a circular office building for high-tech firms. There is just one thing in short supply: the firms themselves. So far the building has only about a dozen occupants. “Well, we’ve built a collective farm. Now we need the farmers,” quips one of the Tatar officials. Whether those farmers will come depends on a range of factors mostly outside Tatarstan’s control.

Technical modernisation has been one of Russia’s obsessions for centuries. At this year’s St Petersburg Economic Forum, Herman Gref, the chairman of Sberbank, Russia’s largest state bank, asked a short and simple question: “Can Russia compete?” The answer supplied by an American participant, Loren Graham, a historian of science at the Massachusetts Institute of Technology, was somewhat longer.

There was a difference between invention and innovation, he said. Russian scientists and engineers invented the laser, electric light and hydraulic fracking, yet time and again the country failed to reap any economic benefit from its scientific brilliance. The reason, Mr Graham explained, was not a lack of business talent but the adverse social, political and economic environment. Russia’s authorities build expensive innovation cities, “but at the same time they prohibit demonstrations, suppress political opponents and independent businessmen, twist the legal system and create a regressive, authoritarian regime…They want the milk without the cow.”

None of this was particularly new to Mr Gref. In 2000 the liberal economist, then aged 36, was picked by Mr Putin to draft a ten-year economic programme and lead reforms. “The centrepiece of the new social contract is the primacy of the citizen over the state,” Mr Gref wrote at the time. “The country has a unique chance provided by political stability, appetite for reform and rising oil prices to renew itself. Unless that chance is used, economic regression is inevitable, threatening not only social stability but the existence of Russia as a state.” Mr Putin signed off on Mr Gref’s plan and hired Andrei Illarionov, a determinedly libertarian economist, as his adviser.

During the first eight years of Mr Putin’s reign the economy grew by an impressive average of 7%, kickstarted by a 70% rouble devaluation in 1998. As state finances and economic rules became more stable, the market reforms of the 1990s began to have an impact. From the mid-2000s soaring oil prices stimulated further growth, mainly in the services and construction sectors, but also fuelled imports, and the economy started to overheat. When the financial crisis hit in 2008, the Russian economy crashed, contracting by 10% from the peak of 2008 to the trough of 2009.

The subsequent recovery was driven by higher government spending that propped up consumption. Between 2010 and 2014 the economy grew by only 3% a year, even though revenues from oil exports were 70% higher than during the oil boom of 2004-08. Russia used its abundance of natural resources to create a corporatist state that suppressed competition. Between 2005 and 2015 the share of the state in the economy doubled, from 35% to 70%.

Now the economy is in recession. Last year GDP shrank by 3.7% and real disposable income fell by 10%. Investment in fixed assets declined by 37% over the past four years, with the steepest fall coming after Russia’s attack on Ukraine in 2014.

The people running the economy are competent, well-educated technocrats (such as the head of the central bank, Elvira Nabiulina). But there are limits to what they can achieve. A depreciation of the rouble against the dollar of almost 50% since the start of 2014 has failed to rekindle economic growth, partly because Russian producers in the past preferred to import parts and materials rather than invest in domestic capacity. Those intermediate imports have now become unaffordable.

The slump in the oil price and Western sanctions have exacerbated the problems, but they did not cause them. Growth started to slow down in 2012 and 2013 when the oil price was still high and before the invasion of Ukraine. The root causes are that Russia’s market is not free, and the rules are opaque and enforced inconsistently. As an upper-middle-income country, it can develop only if its economy is integrated with the rest of the world. Its confrontations with the West and the activities of its security services make it an unenticing target for investment. “The investment climate matters in an open market economy. A state economy does not need an investment climate; it needs security services,” jokes Sergei Belyakov, a former deputy economics minister. Russian businessmen have stopped investing in their own country mainly because they see no future.

 

 

Property and power

When the Soviet Union collapsed, many people hoped that once liberated from communist ideology and enjoying a free market, Russia would be able to make good use of its immense natural and intellectual resources. Yegor Gaidar, the architect of the Russian reforms, was among the few who realised that the market alone could not solve Russia’s fundamental problem: the close nexus between political power and property. In an article published two years before he took charge of the economy, he wrote: “A market [by itself] does not answer the key question of who is supposed to benefit from the results of economic production; it can serve different social structures. Everything depends on the distribution of property and political power.” Yet although the 1991 revolution overturned the political and economic system and led to the sale of state assets, it did not sufficiently separate political power and property.

Part of the problem was the type of economy modern Russia had inherited from the Soviet days. Stalin’s crash industrialisation and urbanisation was designed to create a militarised autarky with a total disregard for cost, financial or human. Factories were built in cold and inaccessible places, using forced labour. The output of those factories was often worth less than the input in energy and materials. After Stalin’s death they were kept going by oil and gas money. The factory managers, known as “red directors”, travelled to Moscow to haggle with the relevant ministries for resources. They employed millions of people and had enormous lobbying power. When the Soviet Union collapsed, the only way to keep them quiet was to sell them their factories, which meant that much of industry remained in the hands of the old elite. Mr Gaidar reckoned that this was a price worth paying to prevent civil conflict.

Yet many of these companies could survive only if their energy and transport costs were subsidised. For example, Yukos, once Russia’s largest oil firm, was forced to sell 70% of its oil in the domestic market, yet since its buyers could not afford to pay an open-market price, they accumulated huge debts that in the end had to be written off, says Mikhail Khodorkovsky, the company’s former owner.

But whereas Gaidar’s government in 1992 had to act urgently to stop the country from falling apart, Mr Putin had no such excuse. When he first took over, oil prices were rising and there was broad political support for reforms. However, according to Clifford Gaddy and Barry Ickes, two American economists, Mr Putin did not merely fail to dismantle the Soviet structure; he used Russia’s windfalls to reinforce it in order to preserve social stability and votes.

It was always unrealistic to think that after the fall of the Soviet Union Russia would be able to build institutions overnight. Russia had been subjected to totalitarian rule for so long that it had no memory of life before it. Douglass North, a Nobel prizewinning economist, and co-authors have written that in Russia, as in many other countries, access to valuable rights, economic activities and resources is determined by privilege enforced by the political and military elites. This system, which he calls a “limited-access order”, relies on the ability of the elites to control rents, be it from land, raw materials or jobs for cronies. Its main objective is to preserve stability and prevent uncontrolled violence by giving those elites access to streams of rent. But that state monopoly on rent and violence collapsed with the Soviet Union.

Oligarchs and beyond

In the mid-1990s control over natural-resource firms passed to the oligarchs, a powerful group of business tycoons who emerged from the rubble of the Soviet Union. Their power rested not so much on violence but on entrepreneurship, which allowed them to accumulate capital. But they also cultivated personal connections with the liberals in the government to gain privileged access to the most valuable assets.

In 1995 they struck an audacious deal, offering to lend money to the cash-strapped government and put their resources, including the media they controlled, behind an ailing Yeltsin. In return, they asked to manage the government’s shares in natural-resource firms. When Yeltsin was re-elected in 1996, they were allowed to auction off those shares to themselves. This “loans for shares” privatisation undermined the legitimacy of Russian capitalism and compromised the idea of property rights.

To protect their assets, the oligarchs had to ensure the continuity of the regime. In 1999, as Yeltsin prepared to step down, Boris Berezovsky, the ultimate oligarch, who had worked himself into the president’s family, proposed Mr Putin as Yeltsin’s successor. According to Berezovsky, Mr Putin had originally wanted to be chairman of Gazprom, Russia’s natural-gas behemoth, but instead he was offered the job of running Russia Inc.

Mr Putin was shaped mainly by two experiences. One was his service in the KGB, which made him a statist. The other was his time in St Petersburg, where he served as deputy mayor in the early 1990s, dabbling in business. That turned him into a capitalist, but of a particular kind. Capitalism to him meant not free competition but connections, special access and, above all, deals. As Fiona Hill and Clifford Gaddy wrote in their book, “Mr Putin: Operative in the Kremlin”, “Capitalism, in Putin’s understanding, is not production, management and marketing. It is wheeling and dealing. It is not about workers and customers. It is about personal connections with regulators. It is finding and using loopholes in the law, or creating loopholes.” Mr Putin did not destroy the oligarchy but merely changed the oligarchs, creating much closer links between property and political power. He wanted to control the market, transferring its benefits to the people he trusted—friends from St Petersburg and former KGB colleagues.

But whereas the oligarchs in the 1990s were ruthless self-made businessmen driven by profit, the men Mr Putin brought to power were specialists in suppression, violence and control, driven by revenge. The siloviki, people with roots in the KGB and other powerful ministries, had no special business skills, but quickly took over the commanding heights of the economy, capitalising on popular discontent with the oligarchs and using their licence to exert violence to amass property. In 2003 they jailed Mr Khodorkovsky, the most independent and politically ambitious of the oligarchs. A year later Yukos, his oil company, was dismembered and its assets taken over by Rosneft, a state oil firm chaired by Igor Sechin, one of Mr Putin’s most trusted lieutenants and an informal leader of the siloviki.

During the years when the oil-price boom fuelled domestic consumption, the new elite not only came to control the distribution of rent, it also limited access to the market in order to reduce competition, developing a system which Kirill Rogov, a Russian political economist, describes as “soft legal constraints”. It involves writing the rules in such a way that to observe them is either prohibitively expensive or downright impossible, then handing out informal licences to break those rules.

 

Islamic countries who sponsor terrorism are less of a threat that Russia?????

Am I taking crazy pills here.

Licence to offend

Just as in the Soviet era red directors haggled for resources, market participants now haggle for the right to break the rules, so the system gives the security services ultimate economic and political control. The licence can be withdrawn at any time if its holder steps out of line or gets too greedy, or if his assets start to look too attractive.

The story of Igor Pushkarev, a former mayor of Vladivostok, illustrates the point. In the early 2000s Mr Pushkarev, the owner of a large cement firm in Russia’s far east that got a lot of orders from the government, joined Mr Putin’s United Russia party, and in 2008 he was elected mayor of the city. Earlier this year he challenged Vladimir Miklushevsky, the regional governor, in the party primaries. Mr Miklushevsky went to see Mr Putin, and the next day Mr Pushkarev was arrested for “abuse of office”. The FSB started to expropriate his assets straight away.

Such lack of clear property rights creates distrust at all levels of Russian society, heightens the role of the security services and raises transaction costs. Every other Russian shop or restaurant employs security guards. While the economy was growing, there were plenty of profits to spread around and keep everyone happy, but now that it is shrinking, the rules have become even less clear and the fight for resources has turned more brutal. Property can be taken away regardless of political loyalty, turning owners into temporary holders.

Take Vladimir Yevtushenkov, the owner of Sistema, a holding company, who is perfectly loyal to the Kremlin. In 2009 Sistema bought a controlling stake in Bashneft, a medium-sized oil firm, from a local authority for $2.5 billion. It had been given explicit approval by Dmitry Medvedev, who was president at the time. But in September 2014 Mr Yevtushenkov was arrested and charged with buying stolen goods. His real crime was reportedly to refuse to sell Bashneft, which had become one of the world’s fastest-growing oil firms, to Rosneft, at a price below its market value. After three months under house arrest, Mr Yevtushenkov was released and cleared of all charges—but not before giving up Bashneft, a contolling stake in which has now been sold to Rosneft for $5.2 billion. The day after he was released, Mr Yevtushenkov (who still owns MTS, Russia’s largest mobile-phone company) went to a drinks party at the Kremlin and spoke to Mr Putin. “I thanked him for his wise decision…to release me,” Mr Yevtushenkov recently told Dozhd, an independent internet television channel. He continued: “If [you] like any of my other companies—[you are] welcome.”

Faced with prolonged economic stagnation, the Kremlin is now trying to stimulate growth by pouring money into the military-industrial sector and into infrastructure projects. Given the level of corruption, though (see chart), the cost of these projects could outweigh their benefits. And in the absence of a thriving private sector, those new roads and bridges may not do much good.

The main problem with Russian modernisation, says Mr Rogov, is that the new, competitive urban middle class that has emerged as the economy has developed has no place in the current authoritarian model, which is designed for those who depend on the state but cannot compete.

The prospects for change are not encouraging. As North observed, limited-access orders have been in operation for thousands of years: “No forces inherent in the logic, social structure or historical dynamics of limited-access orders inevitably lead them to become open-access orders. Because natural states have internal forces built on exclusion and rent-creation, they are stable orders…extremely difficult to transform.” Technology does not help because the elites can adopt it selectively, without having to face competition.

Natalia Zubarevich, a Russian economist and geographer, argues that one of the biggest risks for Russia is not an implosion but a slow economic and intellectual degradation. As long a Russia’s elite sees modernisation as a matter of technology rather than of open access based on the rule of law, Innopolis is likely to remain the smallest town in Russia.

I think that Russia is considered the biggest potential threat is because of their military is the most powerful in the world next to ours and they have the largest stockpile of nukes except for us.  

Stan Wang - 

LOL develop a strategy to defeat ISIS number 1 huh?

 

I thought he already had that planned out, but didn't want to tell the public about it?  



don't forget ISIS will be wipped out in the first 100 days, better get going with it