Are The Russians Coming?

Submitted by Erico Tavares of Sinclair & Co.

Are The Russians Coming?

Russian President Vladimir Putin believes that a serious confrontation with the West is coming.

In a recent speech at the Valdai conference in Sochi, laced with geopolitical and historical references, he stated that “changes in the world order – and what we are seeing today are events on this scale – have usually been accompanied by if not global war and conflict, then by chains of intensive local-level conflicts.”

What type of conflict is he referring to?

In the nuclear age, a head on collision between the major world powers is unthinkable. The devastation that would ensue would likely end civilization, if not all life on this planet. It would take a real act of desperation for anyone to use that card.

Russia remains a nuclear powerhouse for sure. However, when it comes to conventional warfare their capabilities have significantly fallen behind in recent decades. And it turns out that this has real geopolitical consequences.

Russia’s Asymmetrical Disadvantage in Conventional Warfare

The following picture, widely circulated in the Western media some days ago, depicts a Russian strategic bomber being intercepted by a Portuguese fighter jet on a NATO mission [Note: so far this is perhaps the most salient feat in Portuguese military achievements in an otherwise terrible year].

More than yet another alleged incursion into NATO airspace, what is striking in this picture is the obvious difference in technologies of the two aircraft: the Russian bomber, the Tupolev Tu-95 or the “Bear” as it is known in Western circles, still runs on propeller engines. First introduced back in 1952, it is an icon of the Cold War - and one of the noisiest military aircraft around. Russia is the only country in the world which still uses propeller-powered bombers.

For sure the “Bear” can still get the job done, but compare that to its US rival, the B-52 Stratofortress, introduced at around the same time. Having been continuously upgraded over the years, it now features subsonic, jet-powered engines and advanced technological capabilities. It is so modern and effective that the US Air Force is considering extending its use beyond 2040. And the B-2 stealth bomber, a (very expensive) marvel of modern US technology, is so far apart that it is not even comparable.

Unlike its Western counterparts, in order to project force the Kremlin can only rely on its dated Cold War arsenal. Looking at military spending in recent decades clearly shows why.

Military Expenditure in Selected Countries (constant 2011 US$ billion): 1988-2013
Source: SIPRI.

After the collapse of Russia's economy in the early 1990s, the country's military spending pretty much went down with it. It has started recuperating only recently. On the other hand, the US has been outspending everyone else by a wide margin since the end of the Cold War, and is clearly on a league of its own. Even “pacifist” Japan and Germany together spend more than Russia today, as part of their international commitments. Saudi Arabia, Russia's oil rival and fierce opponent of its allies in the Middle East, is not too far behind.

Putin is keenly aware of this asymmetry in conventional terms. Going back to the speech referenced earlier, he stated that “in the event of full renunciation of nuclear weapons or radical reduction of nuclear potential, nations that are leaders in creating and producing high-precision systems will have a clear military advantage. Strategic parity will be disrupted, and this is likely to bring destabilization.”

Western military leaders are of course emboldened by this situation and may just keep on pressing their advantage.

But Russia is not out. While it may be out-gunned for now, its military is still world class, featuring impressive capabilities – including various types of advanced nuclear weapons. And it is not alone either. The world’s emerging superpower, China, is increasingly on its side, which had not been the case during the Cold War. Moreover, it has diplomatic and economic arguments which can augment its military capabilities. Just ask any European using Russian gas to keep warm this coming winter.

Perhaps this is why Forbes magazine just ranked Putin as the world’s most powerful man for the second year running. The question is, how will he use that power?

A New Cold War?

While the world’s superpowers could not risk fighting each other directly during the Cold War (although they came close a few times), they were actively engaged in a warfare of another kind: supporting proxy wars, with one side trying to entangle the other in messy and expensive regional conflicts, while overtly and covertly undermining the support for its ideology.

The Iron Curtain, the Vietnam War, the Soviets in Afghanistan, the regime overthrows across Latin America, the nuclear arms race... We should all be thankful that those days are behind us. Or are they?

Today the US can entangle itself with no help from others, given all that has been going on in the Middle East. The bills keep piling up, and there could be a scenario where the US might run out of dollars before the world runs out of terrorists. Still, renewed intervention is a real prospect should things start spinning out of control in the region – nobody else has the capability to step in and preserve energy flows to the West. Senator John McCain, which clearly favors a more muscular approach, will have a very busy time as the new head of the Senate Armed Services.

Russia is also gradually being dragged into regional conflicts of its own. With the situation raging in Ukraine, one wonders how much longer it can stay on the sidelines, particularly if pro-Russia forces start losing considerable ground there. And things are not looking too great for the besieged Assad regime in Syria, which hosts the Russian fleet at the Mediterranean port of Tartus. The bills are starting to add up for the Russians too.

But confrontation can extend beyond military means alone. Globalization and greater economic integration in the post-Cold War world facilitated the creation of another “weapon” that can be used as a retaliatory measure: economic sanctions.

For all of Russia’s bravado in the face of Western imposed sanctions pursuant to its role in Ukraine, there is no doubt that they have a real bite to them. The collapse of the rubble has accelerated in recent weeks and ordinary Russians are now paying dearly for essential foreign goods, even those that originate in the countries that stepped in to replace European food and other imports. Furthermore, the coincidental (or not) sharp decline in oil prices undermines Russia’s staying power in this situation, as well as its ability to use its own energy supplies as a retaliatory measure given the dwindling of foreign reserves.

So far the West seems to be prevailing here, but there could be serious blowback consequences on Russia’s main trading partners.

Composition of Russia’s Imports by Country: 2012 est.
Source: CIA World Factbook.

The graph above shows that many Western companies – and crucially banks, many of which are heavily exposed to emerging markets – might share the pain as well. Let’s not forget that the disruption of international trade pursuant to the introduction of the Smoot-Hawley Tariff Act in 1930 in the US and the subsequent retaliatory measures largely contributed to the length and depth of the severe global depression that followed.

Not even China, which so far has emerged as a beneficiary of these East-West spats by securing long-term imports of cheap Russian gas and increasing its global influence while everyone else gets bogged down in regional conflicts, might escape unscathed.

Therefore, as each side escalates its retaliation and seeks to inflict greater damage on the other, both in terms of economic loss and human suffering, we might be getting close to a point of no return. A dynamic can be set in motion where nobody will want to “lose face” and yield to the demands of the other side. And the world might once again be inexorably slipping into another Cold War, just as Putin warned. We will all be worse off as a result.

It seems that international diplomacy is becoming as dated as those Russian bombers. Hopefully cooler heads will prevail.