Daily Archives: October 20, 2007

October 20, 2007 — Contents


(1) Inflation Menaces Russia with Renewed Horror

(2) Stormclouds on Russia’s Political Horizon

(3) Russia and Iran: The Dynamic Duo of Evil

Uh-Oh . . . Is That Mean Old Mr. Inflationski we See Behind the Curtain?

The Moscow Times reports double-digit overall inflation in Russia’s future, with prices on the market basket of goods ordinary people can afford even higher:

Rising food prices swung to the top of the political agenda as Finance Minister Alexei Kudrin conceded Thursday that inflation could hit double digits this year, busting through the government’s target of 8 percent. “We have not yet completed our own forecasts, so I turn to experts’ views, according to which inflation could be about 10 percent,” Kudrin told reporters.

With the State Duma and presidential elections looming on the horizon, rising consumer costs and spiraling inflation are emerging as political hot potatoes. Higher food prices were a dominant theme in President Vladimir Putin’s televised call-in show Thursday, as several pensioners quizzed him on what he proposed to do about it. Putin announced that the government had started to sell grain from national reserves to ease domestic prices, a measure that comes on top of cuts in import tariffs on milk and other dairy products earlier this week. Putin also backed calls for a crackdown on local monopolies in the country’s food markets.

Over the last year, milk prices have risen 16.5 percent, butter has risen 20.3 percent, vegetable oil 17.1 percent and meat 7.4 percent, Russian Newsweek reported Monday.

State television this week has shown footage of Prime Minister Viktor Zubkov checking food prices in stores, a visible sign to voters that the government is taking the hikes in food prices seriously. “I’ve noticed the change, but prices here are always rising,” said Nadezhda Osipova, 68, a shopper at a Ramstore supermarket in northern Moscow. She added, however, that the store had “good discounts for the basics: sugar, salt and flour.” Earlier in the day, Deputy Economic Development and Trade Minister Andrei Belousov said full-year inflation could be even higher than Kudrin suggested.

Soaring food prices were the main reason behind a rise in consumer prices of 0.5 percent in the first week of October, and 0.4 percent in the second, Belousov told reporters. Food accounts for more than 40 percent of the country’s consumer price index. Analysts have said for some time that the government’s 8 percent inflation target was looking increasingly unlikely to be met, but Thursday’s comments were the first time officials have conceded that inflation could reach double digits. “It’s not easy to acknowledge [higher inflation], particularly in an election year, when the political aspect of low inflation is crucial,” said Julia Tsepliaeva, an economist at Merrill Lynch.

Agriculture Minister Alexei Gordeyev this week said the government was in talks with retailers and producers to freeze prices on “socially significant products,” such as milk, vegetable oil and butter. Retailers have said they will introduce price freezes — but only if manufacturers agree to do the same. In an open letter to Zubkov this week, the Russian Union of Dairy Companies asked the prime minister to consider their position, Kommersant reported. “We think that the adoption of measures on a federal and regional level to limit prices of dairy products is undesirable, as it represents yet another attempt to solve the population’s social problems at the cost of the countryside,” the letter said. Zubkov has hinted that rising food prices are down to more than rising costs, while the Federal Anti-Monopoly Service says it is investigating the country’s six largest dairy companies over price collusion.

Shoppers at the Rizhsky market in northeast Moscow echoed this. “Prices have risen because the people who work at the bazaar have artificially raised them,” said Valentina Maksudova, 75. “I believe in Putin. He will help fix the problem with the prices.” [LR: These idiots also had faith in Stalin.] During Thursday’s phone-in show, Putin said some local authorities had given preferential treatment to intermediary companies, which has driven up food prices. “[Authorities] must create market conditions and not protect those they have a special relationship with,” Putin said. Marina Kagan, head of corporate affairs at leading diary producer Wimm-Bill-Dann, said a lot of the talk about price collusion had been “emotional.”

“We are working with the [anti-monopoly service] on this issue,” she said.

Unimilk, the country’s second-largest milk producer, appeared to fall into line with calls for voluntary price curbs, saying in a statement this week that it would freeze prices until the end of the year. Producers argue that food prices have increased because of unfavorable market conditions. Kagan said the company had been affected by a particularly dry summer in the country’s milk-producing regions and higher global demand for powdered milk products. “We are in a dialogue with the government, but there are some factors that are beyond our control,” Kagan said. “Currently, we are not planning any price increases before the end of the year.”

But analysts said it was not so easy for producers to freeze prices as they grapple with cost rises of their own. “All of the producers over the last 18 months have been trying to deal with rapidly rising costs: transportation, personnel, advertising,” said Brady Martin, a consumer goods analyst at Alfa Bank. “Their response has been to raise prices.” While analysts concede that the government’s measures on import and export duties could have an impact on inflation in the short term, there is concern that retailers are simply too numerous for any price controls to have a widespread effect.

Alexander Morozov, chief economist at HSBC in Moscow, said the price controls would have a greater impact on cities such as Moscow and St, Petersburg, where the organized retail sector — consisting of the larger supermarket chains — represents a greater share of the market. The government has sought to emphasize the global factors behind inflation. “Our country is becoming part of the global economy and all that happens on the global markets affects [us],” Putin said during the program, noting that the growing use of grain in biofuel production and the lowering of agricultural subsidies in the European Union had all contributed to price hikes. Grain prices have risen 60 percent year on year globally, as higher energy costs and increased demand for grain have coincided with poor harvests.

Economists say domestic factors are as much of an issue in pushing up inflation. In the run-up to elections, the government has increased its appetite for budgetary spending, throwing money at pensions and wages. Recent hikes in state salaries have gone straight into consumer markets, said Tsepliaeva, of Merrill Lynch. A more palatable measure, perhaps, would be to allow the ruble to appreciate, but the Central Bank has already indicated that it will not do this before the end of the year. A weaker ruble helps domestic industry, crucial to filling the Kremlin’s tax coffers, and the government has to balance the interests of industry and those of the electorate.

Masha Lipman, a political analyst at the Carnegie Endowment for International Peace, said the government had a tendency to throw money at its problems, rather than face up to the task of carrying out difficult reforms. “The policy of the current government is demobilization. They try to keep the people reasonably content and have pushed them further and further away from decision making,” Lipman said. “This means that they can’t count on the public understanding.”

Forbes has more on the debacle, in an article headlined: “PUTIN ADMITS INFLATION IS OUT OF CONTROL.”

Russian President Vladimir Putin isn’t one to mince words–as evidenced most recently by a question and answer session, broadcast on Russian television on Thursday. During the broadcast he lambasted U.S. foreign policy on Iraq and Iran, accused Western companies hoping to snatch some of Russia’s oil and gas wealth of indulging in “political fantasies” and promised to ramp up the country’s nuclear arsenal. But lost amidst the tough talk was a rare admission from the president that the economy wasn’t quite as healthy as the government would like the electorate to believe, mere months away from presidential elections.

Putin said that inflation, which has risen by 8.5% so far this year, was a problem as the Russian economy hadn’t stayed within “the planned parameters;” he’d hoped to keep inflation below 8.0% for the year. Inflation is expected to rise even higher–up to 10.0%–according to Finance Minister Aleksei Kudrin. “This is a problem against which the government must fight,” Putin, the KGB agent, turned President, said. Though of course Russia isn’t to blame, he added. “Our country is becoming part of the world economy, and what happens on world markets has an effect on us,” he said, laying part of the blame at the door of the European Union. He said that an end to subsidies from the EU had driven up the price of main food products by 25.0%. He said that the government was adopting measures to tackle inflation, such as reducing import duties on dairy products, and that prices would stabilize by the end of the year.

Needless to say the admission was also rapidly followed by protestations about the strength of the Russian economy and the government’s responsibility for this. Putin said that GDP growth for the year has so far been 7.7%, while the country doubled its foreign investment and gold reserves and incomes rose by 13.4%. “Russia is strong enough and rich enough to defend itself,” he added.

Fifty-five year old Putin, who took over as President in 2000 remains an idolized figure in Russia, despite his controversial image in the West. The question and answer session–his sixth so far–had 1.7 million questions submitted according to the Kremlin. Under the Russian constitution Putin will have to stand down before the presidential elections next March, rather than run for a third term. He has kept analysts second guessing not only about his own role–which looks increasingly like to be as prime minister–but who will replace him as head of a country which is rapidly beginning to reinstate itself as a leading global power.

Meanwhile, the MT reports, heedless of what the Russian people actually want or need, just as in Soviet times, the Kremlin barrels ahead with its crazed provocation of Cold War II, Arms Race Redux:

President Vladimir Putin announced Thursday that the defense industry was developing new nuclear weapons as part of a “grandiose but fully realistic” plan to rearm the military. “We will develop missile technology, including completely new strategic complexes,” he said during a televised call-in show. “Our plans are not simply considerable, but grandiose. At the same time, they are absolutely realistic,” he said. “Our armed forces will be more compact but more effective and better able to ensure the defense of Russia.”

The clearly populist remarks were worded in a way that the public could easily understand. [LR: These remarks can only be populist if the people are benighted morons.] But the message also appeared to be aimed at the United States, which is determined to build a missile defense shield in Eastern Europe, despite Russia’s objections. Putin also took a question on U.S. missile defense during the call-in show, vowing that the armed forces would respond if the plans went forward. “If these decisions are made without factoring in the interests of the Russian Federation, we will take steps to ensure our security,” he said.

The military’s General Staff is preparing the response, he said in answer to a question from an officer who participated in the testing of an intercontinental ballistic missile earlier Thursday. The Topol-M, the nation’s newest intercontinental ballistic missile, was fired from the Plesetsk Cosmodrome in northern Russia and flew across the country to hit a target on the Kamchatka Peninsula. Senior Russian and U.S. officials have met repeatedly to try to resolve differences over the U.S. missile defense plans. Russia has expressed concern that the shield might be used to target its intercontinental ballistic missiles. Washington says it would only monitor and intercept missile launches from Iran and North Korea.

Putin met with the U.S. secretaries of state and defense last week to discuss the issue again, and initial reports indicated no progress. But Putin said Thursday that the two sides had edged closer to a compromise. “The latest contacts with our American colleagues show that they have indeed given some thought to the proposals we made, and they are looking for a solution to the problems and for ways to ease our concerns,” he said. The Financial Times reported Thursday that the United States had offered to scale back its missile defense plans if Iran halts its nuclear program. The report, citing senior U.S. officials at a meeting of NATO governments Wednesday, said visiting U.S. officials told Putin about the offer last week in an effort to convince him to put pressure on Iran. Putin visited Teheran on Monday and Tuesday. Iran’s top nuclear negotiator, Ali Larijani, said Wednesday that Putin had carried a “special message” that included the nuclear issue in talks with Iran’s supreme leader, Ayatollah Ali Khamenei. But on Thursday, Iranian President Mahmoud Ahmadinejad denied that Putin had discussed any such trade-off during his visit.

During his call-in show, Putin also promised upgrades for the naval and air components of the country’s strategic nuclear triad, including for Tu-95 and Tu-160 long-range bombers. He said conventional forces would be beefed up as well, with the commissioning of a much-delayed fifth-generation jet fighter in 2012 as part of a rearmament program that will be completed by 2015.

Stormclouds on Russia’s Political Horizon: Putin’s Time of Troubles

Interesting, very interesting. When last we heard from an obscure little dweeb named Andreas Umland, he was spouting a torrent of outrageous lies about Ukraine in the Moscow Times. Maybe he got knocked on the head (or maybe it was LR’s withering blast that awakened his common sense), but now he’s talking sense about Russia. Writing again in the Moscow Times Umland (now suddenly identifed as “a former visiting fellow at Stanford, Harvard and Oxford”), in addition to being editor of the book series Soviet and Post-Soviet Politics and Society, says that there may be stormclouds on Russia’s political horizon:

President Vladimir Putin’s decision to head the federal list of United Russia in the State Duma elections may one day be seen as the worst bungle in his biography as a statesman.

The foreseeable result of the outgoing president’s unexpected foray into parliamentary affairs will be a crushing victory for United Russia in the December election. The party of bureaucrats — an organization that did not even exist five years ago — will probably receive more than 50 percent of the vote. Since many of the remaining votes will be spent on parties that have little chance of overcoming the new 7 percent barrier, the next Duma will presumably become entirely dominated by United Russia. So much that even ordinary Russians brainwashed by years of television idolatry of Putin and his policies may begin wondering why the country requires the institution of a parliament at all.

A major rationale of Putin’s centralization policies over the last years was that Russia needs guidance from above in its transition to a full democracy. Many Russians and even some Western observers are convinced that Putin is playing a positive role in Russian history. After the painful years of chaos under Boris Yeltsin, the argument goes, Putin has finally put the creation of a new state under governmental control. Putin had to insert an authoritarian interregnum into the country’s transition, providing stability, direction and confidence that society was craving by the end of the stormy 1990s.

Provisional electoral authoritarianism, as it has been argued, is a necessary steppingstone to a thorough modernization of Russia. As society itself was unable to create a functioning multiparty system from below, it could not help but install an enlightened transitional dictator to lay the foundations of an operational democracy from above. With Putin’s direct participation in the Kremlin-manipulated party process and the country’s resulting return to an almost single-party system, this story, however, will lose its credibility. The following formation of a new government as well as the presidential election next year will be reduced to manifestly formal procedures. That is because Putin is not entering party politics, but a political theater of sorts set up by his own assistants.

This “sovereign democracy” is an imitation rather than the Russian embodiment of democratic principles, such as political pluralism, division of power, checks and balances, an independent mass media and a strong civil society. A modern-day Don Quixote, Putin will be competing against artificial rivals and virtual opponents. He might also face some real enemies in political and civil society. These, however, have been suffering from years of more or less sophisticated intermingling by the Kremlin’s “political technologists” as well as some crude harassment by agencies such as the police, the Prosecutor General’s Office and the secret services. Thus, Putin will not only be entering a playing field where he is the only serious player. He will become part of a skewed game where his own assistants make the rules. Thus, he will not win but triumph. His few real and virtual competitors will not lose but be humiliated.

In view of this new turn of events, many Russian intellectuals will start asking themselves where the country will end up after the Putin era. With his new political system increasingly resembling the Soviet model, more and more educated Russians may start doubting whether Putin is leading the country in the right direction. As Russians’ familiarity with politics outside the country is growing by the year, the Kremlin’s overt domination of the entire political playground will look increasingly archaic. Whereas until now, the Russian political processes resembled — at least on the surface — those of the “civilized world,” the future polity will start to look obviously different not only from the Western political systems, but also from the polities of countries such as Poland, Bulgaria and Ukraine. It will increasingly resemble a number of states that have an ambivalent reputation among the enlightened parts of the Russian elite, such as Belarus, Kazakhstan and China.

With the re-emergence of a de facto one-party state, more Russians will begin to understand that the country is no longer following the path of the rest of Europe. Rather, it will be obviously moving in the opposite direction as it manifestly rejects some elementary principles of the “civilized world.” To be sure, a considerable part of the elite — the increasingly vociferous proponents of a “Russian special path” — shall be delighted by their motherland’s return to a monistic model of society. But others, especially the younger members of the elite, will realize that they are living in a country that increasingly isolates itself from the rest of the advanced countries with a Christian heritage. With its dubious mechanisms of transferring political power from one leader to the next, Russia has an uncertain future.

The medium-term consequences of Putin’s surprising rush into — and death blow against — party politics will therefore be new divisions in the elite resembling the ones in the late 1980s. Nationalist hardliners will defend “the Putin system” as perhaps not entirely democratic, but peculiarly Russian and thus appropriate for their motherland. A new generation of cosmopolitan bureaucrats and journalists will not accept the remaining elements of the country’s facade democracy as being sufficient, and they will voice their concern about the ability of the recentralized state and closed political society to react adequately to domestic and foreign challenges.

As Moscow’s leaders will start quarreling again about whether their country should be a part of Europe or not, a new Time of Troubles may be lying ahead.

Russia and Iran: The New Axis of Evil

Stratfor‘s Peter Zeihan on the Iran-Russia nexus:

For the past several days, high-level Russian and American policymakers, including U.S. Secretary of State Condoleezza Rice, Secretary of Defense Robert Gates and Russian President Vladimir Putin’s right-hand man, Sergei Ivanov, have been meeting in Moscow to discuss the grand scope of U.S.-Russian relations. These talks would be of critical importance to both countries under any circumstances, as they center on the network of treaties that have governed Europe since the closing days of the Cold War.

Against the backdrop of the Iraq war, however, they have taken on far greater significance. Both Russia and the United States are attempting to rewire the security paradigms of key regions, with Washington taking aim at the Middle East and Russia more concerned about its former imperial territory. The two countries’ visions are mutually incompatible, and American preoccupation with Iraq is allowing Moscow to overturn the geopolitics of its backyard.

The Iraqi Preoccupation

After years of organizational chaos, the United States has simplified its plan for Iraq: Prevent Iran from becoming a regional hegemon. Once-lofty thoughts of forging a democracy in general or supporting a particular government were abandoned in Washington well before the congressional testimony of Gen. David Petraeus. Reconstruction is on the back burner and even oil is now an afterthought at best. The entirety of American policy has been stripped down to a single thought: Iran.

That thought is now broadly held throughout not only the Bush administration but also the American intelligence and defense communities. It is not an unreasonable position. An American exodus from Iraq would allow Iran to leverage its allies in Iraq’s Shiite South to eventually gain control of most of Iraq. Iran’s influence also extends to significant Shiite communities on the Persian Gulf’s western oil-rich shore. Without U.S. forces blocking the Iranians, the military incompetence of Saudi Arabia, Kuwait and Qatar could be perceived by the Iranians as an invitation to conquer that shore. That would land roughly 20 million barrels per day of global oil output — about one-quarter of the global total — under Tehran’s control. Rhetoric aside, an outcome such as this would push any U.S. president into a broad regional war to prevent a hostile power from shutting off the global economic pulse.

So the United States, for better or worse, is in Iraq for the long haul. This requires some strategy for dealing with the other power with the most influence in the country, Iran. This, in turn, leaves the United States with two options: It can simply attempt to run Iraq as a protectorate forever, a singularly unappealing option, or it can attempt to strike a deal with Iran on the issue of Iraq — and find some way to share influence.

Since the release of the Petraeus report in September, seeking terms with Iran has become the Bush administration’s unofficial goal, but the White House does not want substantive negotiations until the stage is appropriately set. This requires that Washington build a diplomatic cordon around Iran — intensifying Tehran’s sense of isolation — and steadily ratchet up the financial pressure. Increasing bellicose rhetoric from European capitals and the lengthening list of major banks that are refusing to deal with Iran are the nuts and bolts of this strategy.

Not surprisingly, Iran views all this from a starkly different angle. Persia has historically been faced with a threat of invasion from its western border — with the most recent threat manifesting in a devastating 1980-1988 war that resulted in a million deaths. The primary goal of Persia’s foreign policy stretching back a millennium has been far simpler than anything the United States has cooked up: Destroy Mesopotamia. In 2003, the United States was courteous enough to handle that for Iran.

Now, Iran’s goals have expanded and it seeks to leverage the destruction of its only meaningful regional foe to become a regional hegemon. This requires leveraging its Iraqi assets to bleed the Americans to the point that they leave. But Iran is not immune to pressure. Tehran realizes that it might have overplayed its hand internationally, and it certainly recognizes that U.S. efforts to put it in a noose are bearing some fruit. What Iran needs is its own sponsor — and that brings to the Middle East a power that has not been present there for quite some time: Russia.

Option One: Parity

The Russian geography is problematic. It lacks oceans to give Russia strategic distance from its foes and it boasts no geographic barriers separating it from Europe, the Middle East or East Asia. Russian history is a chronicle of Russia’s steps to establish buffers — and of those buffers being overwhelmed. The end of the Cold War marked the transition from Russia’s largest-ever buffer to its smallest in centuries. Put simply, Russia is terrified of being overwhelmed — militarily, economically, politically and culturally — and its policies are geared toward re-establishing as large a buffer as possible. As such, Russia needs to do one of two things. The first is to re-establish parity. As long as the United States thinks of Russia as an inferior power, American power will continue to erode Russian security. Maintain parity and that erosion will at least be reduced. Putin does not see this parity coming from a conflict, however. While Russia is far stronger now — and still rising — than it was following the 1998 ruble crash, Putin knows full well that the Soviet Union fell in part to an arms race. Attaining parity via the resources of a much weaker Russia simply is not an option.

So parity would need to come via the pen, not the sword. A series of three treaties ended the Cold War and created a status of legal parity between the United States and Russia. The first, the Conventional Armed Forces in Europe Treaty (CFE), restricts how much conventional defense equipment each state in NATO and the former Warsaw Pact, and their successors, can deploy. The second, the Strategic Arms Reduction Treaty (START I), places a ceiling on the number of intercontinental ballistic missiles that the United States and Russia can possess. The third, the Intermediate-Range Nuclear Forces Treaty (INF), eliminates entirely land-based short-, medium- and intermediate-range ballistic missiles with ranges of 300 to 3,400 miles, as well as all ground-launched cruise missiles from NATO and Russian arsenals.

The constellation of forces these treaties allow do not provide what Russia now perceives its security needs to be. The CFE was all fine and dandy in the world in which it was first negotiated, but since then every Warsaw Pact state — once on the Russian side of the balance sheet — has joined NATO. The “parity” that was hardwired into the European system in 1990 is now lopsided against the Russians. START I is by far the Russians’ favorite treaty, since it clearly treats the Americans and Russians as bona fide equals. But in the Russian mind, it has a fateful flaw: It expires in 2009, and there is about zero support in the United States for renewing it. The thinking in Washington is that treaties were a conflict management tool of the 20th century, and as American power — constrained by Iraq as it is — continues to expand globally, there is no reason to enter into a treaty that limits American options. This philosophical change is reflected on both sides of the American political aisle: Neither the Bush nor Clinton administrations have negotiated a new full disarmament treaty. Finally, the INF is the worst of all worlds for Russia. Intermediate-range missiles are far cheaper than intercontinental ones. If it does come down to an arms race, Russia will be forced to turn to such systems if it is not to be left far behind an American buildup.

Russia needs all three treaties to be revamped. It wants the CFE altered to reflect an expanded NATO. It wants START I extended (and preferably deepened) to limit long-term American options. It wants the INF explicitly linked to the other two treaties so that Russian options can expand in a pinch — or simply discarded in favor of a more robust START I.

The problem with the first option is that it assumes the Americans are somewhat sympathetic to Russian concerns. They are not. Recall that the dominant concern in the post-Cold War Kremlin is that the United States will nibble along the Russian periphery until Moscow itself falls. The fear is as deeply held as it is accurate. Only three states have ever threatened the United States: The first, the United Kingdom, was lashed into U.S. global defense policy; the second, Mexico, was conquered outright; and the third was defeated in the Cold War. The addition of the Warsaw Pact and the Baltic states to NATO, the basing of operations in Central Asia and, most important, the Orange Revolution in Ukraine have made it clear to Moscow that the United States plays for keeps.

The Americans see it as in their best interest to slowly grind Russia into dust. Those among our readers who can identify with “duck and cover” can probably relate to the logic of that stance. So, for option one to work, Russia needs to have leverage elsewhere. That elsewhere is in Iran. Via the U.N. Security Council, Russian cooperation can ensure Iran’s diplomatic isolation. Russia’s past cooperation on Iran’s Bushehr nuclear power facility holds the possibility of a Kremlin condemnation of Iran’s nuclear ambitions. A denial of Russian weapons transfers to Iran would hugely empower ongoing U.S. efforts to militarily curtail Iranian ambitions. Put simply, Russia has the ability to throw Iran under the American bus — but it will not do it for free. In exchange, it wants those treaties amended in its favor, and it wants American deference on security questions in the former Soviet Union. The Moscow talks of the past week were about addressing all of Russian concerns about the European security structure, both within and beyond the context of the treaties, with the offer of cooperation on Iran as the trade-off. After days of talks, the Americans refused to budge on any meaningful point.

Option Two: Imposition

Russia has no horse in the Iraq war. Moscow had feared that its inability to leverage France and Germany to block the war in the first place would allow the United States to springboard to other geopolitical victories. Instead, the Russians are quite pleased to see the American nose bloodied. They also are happy to see Iran engrossed in events to its west. When Iran and Russia strengthen — as both are currently — they inevitably begin to clash as their growing spheres of influence overlap in the Caucasus and Central Asia. In many ways, Russia is now enjoying the best of all worlds: Its Cold War archrival is deeply occupied in a conflict with one of Moscow’s own regional competitors.

In the long run, however, the Russians have little doubt that the Americans will eventually prevail. Iran lacks the ability to project meaningful power beyond the Persian Gulf, while the Russians know from personal experience how good the Americans are at using political, economic, military and alliance policy to grind down opponents. The only question in the Russian mind pertains to time frame. If the United States is not willing to rejigger the European-Russian security framework, then Moscow intends to take advantage of a distracted United States to impose a new reality upon NATO. The United States has dedicated all of its military ground strength to Iraq, leaving no wiggle room should a crisis erupt anywhere else in the world. Should Russia create a crisis, there is nothing the United States can do to stop it.

So crisis-making is about to become Russia’s newest growth industry. The Kremlin has a very long list of possibilities, which includes:

  • Destabilizing the government of Ukraine: The Sept. 30 elections threaten to result in the re-creation of the Orange Revolution that so terrifies Moscow. With the United States largely out of the picture, the Russians will spare no effort to ensure that Ukraine remains as dysfunctional as possible.
  • Azerbaijan is emerging as a critical energy transit state for Central Asian petroleum, as well as an energy producer in its own right. But those exports are wholly dependent upon Moscow’s willingness not to cause problems for Baku.
  • The extremely anti-Russian policies of the former Soviet state of Georgia continue to be a thorn in Russia’s side. Russia has the ability to force a territorial breakup or to outright overturn the Georgian government using anything from a hit squad to an armored division.
  • EU states obviously have mixed feelings about Russia’s newfound aggression and confidence, but the three Baltic states in league with Poland have successfully hijacked EU foreign policy with regard to Russia, effectively turning a broadly cooperative relationship hostile. A small military crisis with the Balts would not only do much to consolidate popular support for the Kremlin but also would demonstrate U.S. impotence in riding to the aid of American allies.

Such actions not only would push Russian influence back to the former borders of the Soviet Union but also could overturn the belief within the U.S. alliance structure that the Americans are reliable — that they will rush to their allies’ aid at any time and any place. That belief ultimately was the heart of the U.S. containment strategy during the Cold War. Damage that belief and the global security picture changes dramatically. Barring a Russian-American deal on treaties, inflicting that damage is once again a full-fledged goal of the Kremlin. The only question is whether the American preoccupation in Iraq will last long enough for the Russians to do what they think they need to do. Luckily for the Russians, they can impact the time frame of American preoccupation with Iraq. Just as the Russians have the ability to throw the Iranians under the bus, they also have the ability to empower the Iranians to stand firm.

On Oct. 16, Putin became the first Russian leader since Leonid Brezhnev to visit Iran, and in negotiations with the Iranian leadership he laid out just how his country could help. Formally, the summit was a meeting of the five leaders of the Caspian Sea states, but in reality the meeting was a Russian-Iranian effort to demonstrate to the Americans that Iran does not stand alone. A good part of the summit involved clearly identifying differences with American policy. The right of states to nuclear energy was affirmed, the existence of energy infrastructure that undermines U.S. geopolitical goals was supported and a joint statement pledged the five states to refuse to allow “third parties” from using their territory to attack “the Caspian Five.” The last is a clear bullying of Azerbaijan to maintain distance from American security plans. But the real meat is in bilateral talks between Putin and his Iranian counterpart, Mahmoud Ahmadinejad, and the two sides are sussing out how Russia’s ample military experience can be applied to Iran’s U.S. problem. Some of the many, many possibilities include:

  • Kilo-class submarines: The Iranians already have two and the acoustics in the Persian Gulf are notoriously bad for tracking submarines. Any U.S. military effort against Iran would necessitate carrier battle groups in the Persian Gulf.
  • Russia fields the Bal-E, a ground-launched Russian version of the Harpoon anti-ship missile. Such batteries could threaten any U.S. surface ship in the Gulf. A cheaper option could simply involve the installation of Russian coastal artillery systems.
  • Russia and India have developed the BrahMos anti-ship cruise missile, which has the uniquely deadly feature of being able to be launched from land, ship, submarine or air. While primarily designed to target surface vessels, it also can act as a more traditional — and versatile — cruise missile and target land targets.
  • Flanker fighters are a Russian design (Su-27/Su-30) that compares very favorably to frontline U.S. fighter jets. Much to the U.S. Defense Department’s chagrin, Indian pilots in Flankers have knocked down some U.S. pilots in training scenarios.
  • The S-300 anti-aircraft system is still among the best in the world, and despite eviscerated budgets, the Russians have managed to operationalize several upgrades since the end of the Cold War. It boasts both a far longer range and far more accuracy than the Tor-M1 and Pantsyr systems on which Iran currently depends.

Such options only scratch the surface of what the Russians have on order, and the above only discusses items of use in a direct Iranian-U.S. military conflict. Russia also could provide Iran with an endless supply of less flashy equipment to contribute to intensifying Iranian efforts to destabilize Iraq itself. For now, the specifics of Russian transfers to Iran are tightly held, but they will not be for long. Russia has as much of an interest in getting free advertising for its weapons systems as Iran has in demonstrating just how high a price it will charge the United States for any attack.

But there is one additional reason this will not be a stealth relationship.

The Kremlin wants Washington to be fully aware of every detail of how Russian sales are making the U.S. Army’s job harder, so that the Americans have all the information they need to make appropriate decisions as regards Russia’s role. Moscow is not doing this because it is vindictive; this is simply how the Russians do business, and they are open to a new deal. Russia has neither love for the Iranians nor a preference as to whether Moscow reforges its empire or has that empire handed back. So should the United States change its mind and seek an accommodation, Putin stands perfect ready to betray the Iranians’ confidence.

For a price.