1989 vs. 2016: Russia Redux?

“History doesn’t repeat itself but it often rhymes” – Mark Twain

There is a myth out there, a rather powerful one, that the single reason for the collapse of the Soviet Union was because President Reagan’s revitalization of the military coupled with the technical marvels like the Strategic Defense Initiative bankrupted the USSR.  They tried to match the spending and couldn’t keep up.  This rationale serves as an article of faith among a certain set of folks – but it is wrong.  There was more than one reason for the collapse of the USSR:  Malaise from a long ineffectual and expensive war in Afghanistan, undercutting of multiple economic initiatives by cronyism, unbalanced military spending at the expense of the social safety net, and a desire for more freedoms from folks which didn’t give a damn about the ‘Great Patriotic War’.

One reason though looms larger than all of them:  The collapse of oil/natural gas prices in the 1979-82 time frame ravaged an economy which was overly reliant on direct revenue from those sources.  Prior to this, they could afford to spend 35% of their expenditures on the military while funding the requisite social programs they needed to buy off the masses.  When the prices collapsed and failed to rise again, they couldn’t afford their war in Afghanistan, buy all the hardware they wanted, and keep the people fed, warm and gainfully employed.  The system grew unsustainable despite the liberalization efforts of Gorbachev and they eventually collapsed.

I bring this up because I read a recent Vox article and it has me wondering:  Are we going to see history rhyme?  Russia and Putin find themselves in dire straits once again.  Last year I assessed Putin was no mastermind, he was playing a game of misdirection and posturing in order to remain relevant in the world and deflect from a host of problems plaguing his troubled nation.  I think the argument has grown more relevant.

As the Vox article states, Russian Federation oil revenues – half of their GDP – have collapsed to less than a third of what they were and they don’t look like they are going to go up anytime soon.  They are locked into expensive wars in the Ukraine and Syria, as well as a number of other frozen conflicts out there like Chechnya.  They are spending 20% of all Federal expenditures on military hardware and that percentage is going to have to go up or they risk losing capability.  Putin’s ability to buy off restive regions and elites is diminishing due to lack of funds and rampant cronyism.  Their social welfare programs are collapsing under fiscal strain and quality of life is declining.  Social discontent is around the corner.

I think there is a tendency to look at events in isolation.  Russia took Crimea – they must be strong.  Putin acted in Syria – he must be brilliant.  But the USSR looked strong right up the moment they weren’t and frankly Russia looks like an economic basket case, the Venezuela of Eurasia.  They can’t support their ambitions.  Increasingly, they can’t support their needs and the rhyme of history sounds a lot like 1989.