Western financial firms are upgrading their assessments of the Russian economy. That means the foreign bankers and credit rating agencies agree with the Russian government that economic growth has resumed. But there is also agreement that with world oil prices are unlikely to rise much in the future and that means the best Russia seems capable of is stabilizing their economy at a lower, less productive level. That means large cuts in government spending, including a defense budget that is now 25 percent smaller. Because of that Russia will go from number four on the list of largest defense spenders to number eight. That also means the replacement of worn out or obsolete Cold War era equipment will take a lot longer and upgrades to or expansion of the military will be restricted. The government has already announced sharp reductions in orders for new armored vehicles, ships and aircraft. Instead thousands of tanks and aircraft will undergo extensive (and much cheaper) upgrades.
The corruption, police state atmosphere and trade sanctions mean that while the rest of the world continues to see an average of three percent GDP growth a year Russia will be stuck at two percent a year, or worse. Since sanctions and much reduced oil income hit in 2014 the government insisted that everything was under control. That was only partly true. The reality is that the real average income of Russians has been declining every month since late 2014 and the decline continues. With so many people seeing their income decline it is not surprise that corruption is getting worse, despite vigorous (or at least well publicized) efforts to curb it. The number of best educated and capable Russians who have left the country since 2014 is over 1.5 million. The poor are getting poorer and more Russians are slipping into poverty. The Ministry of Defense is telling its veteran officers and NCOs that a new benefit for ex-military personnel is preferential treatment when it comes to getting unemployment benefits. There is still the implied promise of a government job for retired officers but, well, you know hard times and all that. And then there are the foreign cash reserves, essential for buying imports. Those reserves will be exhausted later in 2017 or in 2018. So no, the economic news is not good so it is not discussed much in the state controlled mass media. The Internet is another matter, despite ongoing government efforts to shut down that access to what is really going on (or at least other opinions about what the government report).
The government had made progress in restoring the police state that had been dismantled in the 1990s and that has interfered with economic growth. But that police state power also enabled the government to maintain order in the face of yet another financial calamity. Meanwhile the government keeps insisting the West is the enemy. That is not true but most Russians believe it. With a permanently crippled economy Russia will never be a major economic power and must now face a still growing China, which has real and ancient claims on Russian territory adjacent to Russia.
One thing the Russian government and reality agree on is that most of the economic problems are all about the price of oil. Until 2017 the government predicted that the economy would “stabilize” once oil was over $60 a barrel but despite a late 2016 production reduction agreement by the OPEC cartel (that the U.S. does not belong to) that did not happen. The price of oil rose briefly and not by much and then declined again and continues to decline. The government blames the Americans for this and in this case the government is right. The renewed decline in the price of oil is clearly because of the development of effective fracking technology in the United States. This created a sharp increase in oil and natural gas production in North America and that was a major factor in the 2013 collapse in world oil prices. But fracking is expensive and as the oil price declines a growing number of oil and natural gas operations dependent on fracking have to be shut down until the price increases again. The Saudis and Russia hoped the lower oil prices would kill off fracking, but that won’t happen. Rising oil prices have always made it feasible to go after expensive to extract (like very deep or off-shore) oil and natural gas. As prices decline, these high cost operations have to be temporarily shut down, not eliminated entirely and forever. When some firms go bankrupt other firms buy up the assets cheaply and resume production when prices rise again. In 2016 it was believed that if the Saudis eased their current overproduction of oil the price would soon rise to over $60 a barrel. This is still half the previous (pre-fracking, pre-Saudi overproduction) high price of $132 (mid-2008). After that fracking and the Saudis drove down the price of oil and have kept it down. This has hurt Iran, but also Russia and several other nations that have become too dependent on oil export income. By early 2017 it became clear that fracking, something that OPEC cannot control, was the real culprit and that the American frackers had not only survived the extremely low prices but further improved their technology so that it now costs considerably less to produce oil via fracking that it did before 2013.
The Donbas Debacle
The most recent ceasefire in Donbas, which began in late December is still technically in force despite the fact that the number of unprovoked attacks by the Russian backed rebels quickly resumed and kept increasing. The UN estimates that there have been nearly 10,000 deaths in Donbas since April 2014. Another 24,000 people have been wounded. About a quarter of the dead and a third of the wounded were civilians. Despite that the casualty rate has been reduced. In the last two years the fighting in Donbas has left about 3,700 dead. That is a sharp decline from the first year of the war, where there were nearly twice as many deaths. Nearly two million Ukrainians have been displaced, although over half of that took place by early 2015. About 15 percent of the Ukrainian military dead were volunteers, often locals, hastily organized into battalions and these were crucial is halting the initial Russian attempts to grab all of Donbas. Meanwhile it is costing Russia about $2 billion a year to support the rebel controlled half of Donbas. Russian currency circulates there as do about 5,000 Russian soldiers, most of them dressed as local rebels (most of whom are ethnic Russians).
Ukrainians have been able to document the presence of Russian troops inside Donbas, thanks to the fact that Donbas has cell phone service and a lot of people there like to take pictures and share them. Although the Russian soldiers in Donbas are supposed to remove all identifying items from their uniforms, not all the troops do that completely. The Russian troops are not supposed to spend too much time socializing with the locals but they do and often share those experiences on Internet based social networks. Russia denies everything and since Russia has state controlled mass media most Russians see the official version of who is in Donbas, not the reality. The veto in the UN limits international blowback because of Donbas and the fact that Russia has ignored nearly all the things it agreed to in several recent Donbas ceasefire agreements.
An example of this is the way Russians treat OSCE (Organization for Security and Cooperation in Europe) personnel in Donbas. The OSCE presence is recognized by Russia and is supposed to be monitoring the situation in Donbas and verifying who is doing what. That has proved to be difficult because the Russian backed rebels (and sometimes Russian troops pretending to be rebels) regularly interfere with OSCE monitoring team. In 2017 a lot of that harassment has concentrated on the commercial UAVs (usually quad-copters) the monitors increasingly use for their inspections. The rebels will often “arrest” the monitors at gunpoint and confiscate or destroy their UAV. Rebels will usually shoot down OSCE UAVs and claim it was an accident. Russia has apparently been closely monitoring OSCE in Ukraine. This became clear after a hacker attack in late 2016 that hit OSCE personnel in Ukraine. This hack was similar to the one carried out against government networks throughout Ukraine. The Russians ignore or harass OSCE whenever they feel the need to, or simply feel like it. The pro-Russian rebels continue to block the movement of observers in their territory. The OSCE has found that Russian backed rebels are responsible for most (sometimes 90 percent) of the violent incidents in eastern Ukraine. The hundreds of OSCE monitors in eastern Ukraine and Donbas, whose job is to oversee the ceasefire, have been complaining since 2015 that they are being restricted by rebels and, less frequently Ukrainian forces from carrying out inspections. Since early 2016 the rebels have been violating the ceasefire on a daily basis. Anyone in or near Donbas (as a lot of foreign journalists are) can hear or see the daily machine-gun, mortar, rocket and artillery fire by Russian and rebel units. Russia denies everything and insists that any evidence is fabricated. Some OSCE observer teams report coming under rebel fire which, in some cases, is believed to be deliberately directed at the OSCE personnel.
In 2017 Ukraine has recognized the increased Russian use of these aggressive tactics and is accusing Russia of using this approach as yet another new tactic to seize more of eastern Ukraine and absorb it back into the Russian Empire. Officially Russia denies this but the restoration of the centuries old Russian Empire remains a popular goal among Russians, whether the state controlled media puts a spotlight on that or not. Ukraine was always a key component of that empire and Russians want it back.
Ukraine is recovering from the economic damage suffered because of the war with Russia and is coming to realize that the biggest problems Ukraine is facing are internal. Yet despite the continued widespread corruption in 2016 Ukrainian GDP grew 1.5 percent and is expected to be three percent in 2017 (in large part because they are not dependent on oil exports or suffering from sanctions). In contrast 2015 GDP declined 10 percent. But the corruption is still in play and most obvious when it comes to the growing defense budget. The U.S. is not happy with all the continued plundering of the Ukrainian defense budget and threatens to cut support unless the Ukrainian officials stop the stealing and cooperate with each other for the common good. Recent opinion polls show that the majority of Ukrainians would now vote to join NATO and move closer to the less corrupt and more prosperous West. For the last decade Russia has threated to declare war if Ukraine joined NATO. Because of this by 2009 the U.S. lost its enthusiasm for letting Ukraine join NATO, thus leaving Ukraine on its own to deal with Russian aggression. That led to a popular uprising in 2014 that ousted a pro-Russian (and very corrupt) president of Ukraine and triggered an undeclared Russian war against Ukraine. Now there is a new government in the United States but it is unclear if this will mean a more determined opposition to Russia over the Ukraine aggression or not.
So far (since August 2016) 27 Russians have died in combat in Syria. Two of those deaths occurred in March. While Russia is officially in Syria to defeat ISIL (Islamic State in Iraq and the Levant) and keep the Assads in power (semi-officially) they also want to maintain good relations with Israel while do it. But Israel has made it clear that there can never be peace in Syria if Iran tries to establish a permanent presence there. The Iranians say they will and the Russians (so far) have said they oppose that. Iran wants to stay in Syria as part of its decades old effort to destroy Israel. Meanwhile Israel says it can live with the Assads as long as Iran is no maintaining a military presence in Syria. Many Turks agree with Israel on that point. The Russian intervention appears to be permanent (as far as the Russians are concerned) and the Assads agree. Turkey and Iran are not so sure.
Russia and the United States are trying to prevent the offensive against ISIL from being disrupted because of growing hostility between the Turks and the SDF (Syrian Democratic Forces) rebels. This is all about Turkey trying to prevent the Syrian Kurds from establishing an autonomous region in northern Syria. The Turks are the only member of the anti-ISIL coalition that wants to keep the Kurds out of the final offensive to crush ISIL in Syria. The Turks are also opposed to the growing Iranian presence in Syria and Iranian plans to make that presence (and control of the Syrian government) permanent. Israel also opposes the Iranian presence but is neutral about the Kurds and has the support of Russia and the United States for that.
Libya and Egypt
Since February (or earlier) Russia has had a small (about 22 men) group of special operations troops in western Egypt, near the Libyan border. Since late 2016 Russia has openly backed a Libyan faction (the HoR government) the UN and the West does not approve of. The Libyan unity government known as the GNA (Government of National Accord) was created in late 2015 with the support of the UN and the West. GNA took control of Tripoli (the traditional capital) in early 2016 but has been unable to placate or unite the many factions that have been keeping the country in chaos since 2012. The rival HoR (House of Representatives) government based in Tobruk controls eastern Libya and, more importantly, most of the oil production facilities. HoR is better organized, united and hostile to Islamic radicals and terrorists of any sort. HoR gained the very public support of Russia in 2016 in part because Russia was seeking more allies in the Middle East and Egypt was a prospect who highly recommended the HoR faction. One of the first things to come out of that was a contract for Russia to print new currency for HoR and providing unspecified (because of the UN arms embargo) military support. Russia also provided HoR with some support inside the UN as Russia is one of the few countries that can veto proposed UN resolutions. The GNA made a major mistake early on by underestimating the resurrected Libyan Armed Forces and its leader general Khalifa Belgacem Hiftar. Russia did not make that error. In part because of several (since 2016) visits from general Hiftar Russia has now agreed (unofficially) to sell HoR weapons. The GNA has asked NATO to provide assistance in recruiting and training a new military. Most of what was left of the pre-2011 Libyan armed forces was rebuilt by Hiftar, who was a Libyan Army officer who turned against Kaddafi in the 1980s and received asylum in the United States. But Hiftar was unacceptable to some of the factions the UN had united to form the GNA and that turned out to be a bad decision. The HoR has now asked Russia for economic assistance and state controlled Russian oil company has agreed to work with the Libyan NOC (National Oil Company) to repair, upgrade and expand Libyan oil facilities. Hiftar visits Egypt regularly and has managed to keep Egypt, a few other Arab states providing support. Egypt allows banned goods (like weapons and ammo) to cross the border unhindered. Russia and many Arab states are pressuring the UN to rethink its Libyan strategy and its support for the GNA. Libya may turn out to be another Middle East victory for Russia.
March 20, 2017: Russia is setting up a base in northwestern Syria to train members of YPG Kurdish militia. This will cause problems with Turkey. Since late 2016 Turkish troops in northern Syria have been seeking to avoid conflict with the Russians while attempting to intimidate some of the Kurds who have long controlled much of northern Syria. What complicates this is that the Syrian rebels and their Western allies (especially the United States) consider the Syrian Kurds the most effective rebel force and key to driving ISIL out of Raqqa city and the rest of eastern Syria. The Turks are, on paper, the strongest military force in the area. But all Syrians, both the government and the rebels oppose the Turkish intervention. The Turks are mainly doing this because of domestic politics. The Kurdish separatists in Turkey (the PKK) are again openly fighting the government and often use bases in Syria. While the Kurds of northern Iraq will cooperate with the Turks in controlling the PKK, some of the Syrian Kurds (the YPG) have worked closely with the PKK before and the Turks do not trust them to behave like the Iraqi Kurds. Meanwhile Turkey is willing to work with Kurdish militias not associated with the YPG. Russia and Turkey are allies at the moment, but very confrontational with each other about it. The YPG has long been sheltered by the Assad government and used for annoying the Turks.
March 19, 2017: Israeli aircraft hit another Hezbollah convoy inside Syria during the night in an operation the Israelis would not take credit for. The Israelis did warn the Syrian government that, if necessary, they would destroy the Syrian air defense systems (bases, radars and missile launchers around Damascus and in other areas the government has retained control of since 2011) if the Syrians tried to again use their antiquated anti-aircraft missiles against Israeli aircraft. Syrian ally Russia felt compelled to publicly chastise Israel and ordered the Israeli ambassador to explain this bad behavior. Israel and Russia are also allies and do not want to fight each other. That would be expensive for Israel and probably embarrassing for Russia. Despite this public demonstration of anger Russia understands that Israel has a legitimate need to protect itself from Iranian attack via Hezbollah or similar Assad forces.
March 18, 2017: Russia announced that in Syria the government forces had completely cleared ISIL forces from the town of Palmyra and that this effort was made possible by Russia military assistance, primarily air support. For the first half of March Russian warplanes and armed helicopters carried out about 60 sorties a day in support of Syrian troops. Most of this air effort was against ISIL forces defending Palmyra.
March 17, 2017: Israel used an Arrow 3 anti-missile missile to shoot down a Syrian SA-5 anti-aircraft missile that had been fired at four Israeli jets bombing a target (new weapons for Hezbollah) in eastern Syria near Palmyra. Apparently several SA-5s missed the Israeli jets and instead of detonating anyway (as these missiles are built to do) were headed into Israeli air space and Arrow 3 was fired just in case it was a ballistic missile. This was the first time the Arrow 3 has been used in a combat situation. The SA-5 is a 1960s design that Russia has updated and Syria received the latest S-200 version of the missile in 2010. This seven ton missile has a range of 300 kilometers but Israel has apparently developed effective countermeasures. In 2016 Russia sent in an SA-10 (S-300) anti-aircraft system to protect their troops in Syria.
March 16, 2017: A company (150 men) of Russian Army engineers arrived in Syria. These troops are trained and equipped to remove mines and other explosives safely. They were immediately sent to Palmyra, a recently liberated area that ISIL has planted a lot of landmines in.
March 15, 2017: The pro-Assad coalition of Russia, Turkey, Iran and the Assad government ended two days of peace talks with each other about how to settle the Syrian mess. This took place in the Central Asian city of Astana (the capital of Kazakhstan). Nothing was achieved, in large part because all the rebels refused to attend. In January there was another two days of peace talks in Astana with some rebels present and nothing could be agreed to. The major powers involved congratulated each other for getting this far. Another two days of peace talks in Astana are to begin on May 3rd with or without any rebel participation.
Ukraine halted all rail and road traffic into the Donbas areas controlled by Russian backed rebels. This blockade is in response to Russia supporting the rebel seizure of businesses in the areas they control. Ukraine also wants to halt the legal (coal and medicine) and illegal (alcoholic beverages and some drugs) exports that are financing the Russian backed rebels.
March 12, 2017: The government announced that work had resumed on the new Russian naval base in Syria. At the end of 2016 the government revealed a recent agreement with Syria (the Assad government) to expand the current Russian navy facility at Tartus. Before 2011 Russia was building a small, but technically permanent naval support facility in Tartus. By 2012 the several hundred Russians who there working on the project were largely gone from Syria and the Tartus project suspended until the war was over. That changed in mid-2015 when Russia intervened with several thousand air force, special operations and support troops. Russian construction personnel returned to Tartus but work was not resumed in a big way. The current Russian Tartus facility can handle only four medium-sized (under 100 meters long) vessels. That’s because the Russian base only has two 100 meter (325 foot) long floating piers inside of the northern breakwater of the Tartus port. The non-military port activities have been very busy since Russian troops arrived in mid-2015 along with a need to be regularly supplied by sea. A lot of those “supplies” were actually for Syrian military and Iranian mercenaries in Syria. Recent satellite photos show that work has indeed resumed on the Russian naval facility in Tartus.
March 7, 2017: Russia joined with China in complaining after the United States revealed that it had delivered the first THAAD components to South Korea. The THAAD battery may be operational in the next month or so. China, Russia and North Korea made threats, like they always do when it comes to a neighbor defending themselves.
February 28, 2017: In northern Syria Russian warplanes bombed what they thought were ISIL forces. The bomb victims turned out to be pro-American rebels. The American advisors with these rebels were able to quickly get in touch with Russian commanders and get the attacks stopped.
Russia and China vetoed a UN effort to impose sanctions on the Syrian government for continuing to use chemical weapons. In late 2016 Russian chemical warfare experts collected mustard gas samples from a dud shell fired in September by ISIL forces in Aleppo. The Russians also found evidence of ISIL shells filled with chlorine. ISIL is believed to have used chlorine and mustard gas bombs and shells at least 52 times in Iraq and Syria since 2014. A UN investigation found that Syrian Army forces were also using chlorine but Russia never sought to confirm that.