The Russia Briefing

THE EUROPEAN

FUTURES

OBSERVATORY

The Russia Briefing

Background

To many observers, the pivotal point in Russia’s recent past was the fall of the Berlin Wall in 1989. An immediate effect of this change was the dissolution of the Warsaw Pact Treaty Organisation of, what were seen in the West as, Soviet satellite states. In addition to this, the Soviet Union itself broke up into a series of Former Soviet Republics into independent states. The situation was further complicated by the further break-up of a number of these geographical entities, some peacefully (Czechoslovakia into the Czech Republic and Slovakia), some at great cost of life (the break-up of Yugoslavia into the constituent republics), and some unsuccessfully (the attempt of the Chechens to break away from Russia).

By 2005, the old Cold War Soviet Block had dissolved into a complicated pattern of nations across Eastern Europe and North Western Asia that Russia, the heir to the Soviets, saw as within their key sphere of influence. This process of realignment, whilst stabilising to a degree, had not fully played out into a coherent and stable international order, and, in 2005, further conflict within the area could still be foreseen.

As a result of these changes the Russian economy became disjointed, fragmented, and, in places, even de-monetised as Russian citizens reverted to barter transactions. Equally absent was a set of clear cut laws relating to property rights that were enforced by government agencies. Many observers of this period stylised Russia as a Kleptocracy that was dominated by a group of ruling oligarchs.

The economic base of such “Gangster Capitalism” was the energy resources available within Russia. By 2005, Russia had become the second largest exporter of oil and the largest exporter of natural gas in the world. Despite running a trade surplus with the rest of the world, Russia remained, however, a “low absorber” of energy revenues as much of the wealth created flowed out of the country and into Western Europe and the US.

The dilemma facing the Russian government was one of which economic model to follow. There were advocates of both the “Western Model” of development and of the “Chinese Model” of development. The overseas investors, who had an inclination towards the oligarchs in Russia, had a natural inclination towards the liberal-democratic, market based solution of the Western Model. However, ironically, the expression of democracy gave voice to the discontented in Russian society, who tended to push the government towards the more centralist solution of the Chinese Model.

By 2005, those advocating the “Chinese Model” of a more centralised form of development had gained the upper hand. The consequence of this was to cause uncertainty in the minds of foreign investors and partners in the Russian energy business as to whether or not the property rights granted in their licences would be upheld in the future. This, naturally enough, was of concern to the governments within the EU, China, and Japan, who had all started to rely upon Russian resources as a key source of energy into the twenty-first century.

By 2005, Russia was facing a number of key challenges to the future:

1. How could Russia develop a broader economic base to spread prosperity?

2. How could Russia develop greater internal cohesion within its borders?

3. How could Russia limit Western involvement in Russian energy companies?

4. How could Russia fully leverage its energy resources as a tool of foreign policy?

5. How would Russia respond to a resurgent and expansionist EU?

6. How would Russia respond to a resurgent China?

The Nationalist Mission

In recent years, Russia has started to develop its energy resources. However, the nation has not fully benefited from the development of these resources, which has resulted in the weakening of Russian influence internationally. It is your task, by 2025, to set in motion policies that will restore to Russia the benefits of the energy resources and that will extend Russia’s influence abroad. Your primary task is to ensure the development of the Russian economy and to start to restore the place of Russia in the international community.

By 2025, you will have:

1. Ensured that the foreign consumers of Russian energy resources are paying the full cost of the depletion of those resources.

2. Ensured Russian energy revenues are fully used for the development of the Russian economy.

3. Started to restore a counterbalance to American military might.

4. Ensured that the Chinese and Japanese are dependent upon Russian energy resources.

5. Counterbalanced the influence of the EU in the Post Cold War structure of Eastern Europe.

The Liberal Mission

In recent years, Russia has started to develop its energy resources. However, the nation has not fully benefited from the development of these resources owing to the nation not fully embracing the benefits that a market system has to offer. This has resulted in the weakening of Russian influence internationally. It is your task, by 2025, to set in motion policies that will restore Russia into the community of nations. Your primary task is to continue to develop the Russian economy within the wider framework of globalisation, whilst ensuring the territorial integrity of the Russian nation.

By 2025, you will have:

1. Encouraged the participation of foreign investors in the exploitation of Russian energy resources.

2. Further developed Russia as an integral part of the world monetary and trading systems.

3. Reached an accommodation with the US to ensure security in South West Asia (the “Stans”).

4. Ensured that the Russian economy is fully integrated with the Chinese and Japanese economies through the sale of energy resources.

5. Reached political accommodation with the EU over Eastern Europe, and an economic accommodation with the EU to establish a “Special Relationship” over trade.

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