Putin Replaces Chief of Staff Sergei Ivanov

A CNBC article, Kremlin Shakeup Raises Questions About Putin’s Motives, conveniently lists most of the possible reasons. The BBC article is strictly factual. But it has excellent links beneath, under “More on this story.”

The CNBC article presents all the possibilities except one: that anxious to get out of the way of a train wreck, Ivanov actually resigned. Russia’s Reserve Fund is projected to deplete this year. A 2015 estimate suggests that Russia needed an oil price of $105/barrel to balance the budget. Take a look at this debt-to-GNP chart. As John Mitchell famously said, “When the going gets tough, the tough get going.

The explanation of the Moscow Times article relies on personal preferences and petty irritations. The complete absence of reference to the impending train wreck is in itself highly synthetic. By way of dramatic illustration, imagine the headline, “Turkish Coup Caused by Boredom, Petty Jealousies.”

The Ukrainians have their own, hopeful-for-them slant in the Euromaidanpress.com article, “Top Russian economist: Moscow can’t maintain current levels of military spending for much longer.” Ignoring their hope of what this means for Russia’s Ukraine grab, the quote of economist Sergei_Guriev is one of the better references:

The Russian government’s original budget for 2015 was based on the assumption that oil would be US $100 a barrel, that Russia’s GDP would grow two percent, and that inflation would not exceed five percent, he notes. None of those things has proven to be the case; and the government has cut overall spending by approximately eight percent.

“Nevertheless,” he continues, that has not prevented the government deficit from ballooning from 0.5 percent of GDP to 3.7 percent, “a serious problem” even though Russia’s sovereign debt forms “only 13 percent of GDP” because the Ukrainian war has increased spending and Western sanctions have made it harder to borrow.

As a result, Moscow has been forced to dip into its reserve fund. That fund currently amounts to six percent of GDP. Consequently, if the deficit continues at 3.7 percent, the Russian government will run out of money in about two years, forcing it either to withdraw from Ukraine in order to end the sanctions regime or change its budgets in fundamental ways.

Both steps would entail “major political risks for Putin,” Guriev says.

Particularly for the outsider, stability is in part a self-fostering illusion. What does Putin himself think? A glimpse is provided in the aftermath of the assassination of Boris Nemetsov, which occurred on 27 February 2015, within sight of the Kremlin walls. On March 5, Putin vanished from view.  With reports he had the flu, his whereabouts became unknown, except for reference to his residence in Lake Valdai, Novogorod. In the interest of not succumbing to conspiratorial thinking, perhaps he had the flu. But Lake Valdai also put Moscow between him and Chechnya, home of the ethnic Chechen assassin(s).

This background is of great use to open source analysis. The assumption of a stable political background can be as much in error as the prediction of inevitable breakdown. The mind tends to be captured by details, which in this case, are the formal trappings of government. It helps to take a step back, defocus a little, and recall that between 1985 and 2000, when Putin assumed power, Russia was constantly, visibly unstable.

To what extent has Putin consolidated power? Our vision is chronically obscured by the notion that personal consolidation is actually possible. The BBC article, Who runs Russia with Putin?, illuminates:

At the same time, the Russian administrative system – the so-called vertical of power – does not function well: policy instructions are often implemented tardily and sometimes not at all, so others have important roles helping develop and implement projects.

The count of power groups is up to four, plus one accessory:

  • The Kremlin and security apparatus.
  • The Oligarchs.
  • Organized Crime.
  • An obdurate bureaucracy.
  • Subject to the manipulation of the above, the “Masses.”

These groups invisibly incorporate the conflict so visible in our political system. Borrowing a term of biology, the relationship is currently homeostatic, somewhat analogous to Henry Kissinger’s use of the word “equilibrium” for the international realm. It means that for every push, there is a push-back. But something is missing from the table, the weights and measures that, in combination with the four groups, result in homeostasis at this moment.

Sometime around the exhaustion of the Reserve Fund, these things will occur:

  • The Russians diet will consist increasingly of potatoes.
  • The Oligarch empires will become insolvent.
  • Putin’s “emergency lighting system” will switch on, using organized crime to move more money than it already does, for essential activities.
  • The obdurate bureaucracy will become more buyable than they already are.

This trajectory is the partly a consequence of the idea that a Russian version of Anschluss would be a good thing. There are contributions from Saudi use of the oil weapon, and from fracking. It is the ultimately result of a grand design to make Russia a great world power, when it should have tried to be a great economic power. A Scottish poet said it best: “The best-laid plans of mice and men often go awry.”

But the question in our minds is how Putin will handle, or not handle this eventuality. Will he

  • Use the “war cure” for instability, going  hot in Crimea?
  • Hunker  down, choosing to destroy the oligarchs before they depose him, the rest of Russia following him into a new ice age?
  • Attempt to blackmail the West into lifting the embargo? Weapons at his disposal include gas exports and incursions elsewhere in Europe.
  • Be himself deposed, and replaced by a thoroughly corrupt and practical group drawn from the oligarchs?
  • Change his “type”, from the inflexibility of “never backs down” to a more versatile shadow boxer who could more effectively motivate Germany’s natural affection for Russia?
  • Vacate the Ukraine in a bargain to keep Crimea?

The last two options are the ones most available to a facile political manipulator whose is not a psychopath. As a profession, “head of state” is most akin to “CEO”, which tops the professions with psychopathic traits. But Vladimir Putin’s demeanor, as far as it can be observed, seems remarkably free of this.

Edit: Since Putin is a Harley fan, it’s possible that Sergei Ivanov is a Country and Western fan.  So here’s a Johnny Paycheck song for Sergei to hum in his new job.




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