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CHAPTER7 From Crisis to Crisis Russianeverhadaperiodwithasbenignanexternalenvironmentastheearly years of the twenty-first century. Commodity prices grew steadily. Foreigners lent large sums to Russian firms. The country felt sufficiently secure to let its military decline. Its neighbors sought to integrate rather than isolate Russia.MuchofthisexternalenvironmentwasofRussia’smaking.Moscow’s generally friendly relations with neighbors in the early 2000s—especially in comparison with its relations in most of the twentieth century—were the fruitsofGorbachev’sandYeltsin’sdesiretoimprovetieswiththecountriesof EasternEurope.Thepost–ColdWar“peacedividend,”muchdiscussedinthe United States, was far more important to Russia. Foreign investment flowed in, thanks in part to responsible policy making, including better governance compared with the 1990s. The year 2008 marked the end of this honeymoon. In both politics and economics,Russia’sforeignlinksbecamemuchmorecomplicated,deterring rather than promoting growth. As foreign policy became tenser, the first principle of Putinomics—preserving state power and authority—began to obstructthepursuitofeconomicgrowth.Thedoubleshockofwarandrecession transformed Putinomics, as the government shifted toward more cautious , conservative policy making. This agenda that saw the country through the 2008 crash preserved Putin’s political system and rebuilt Russian military power. These were the priorities, and Putinomics achieved them. The cost, however, was to ignore other, less immediate priorities. Efficiency was sacrificed, the private sector was squeezed, and investments were deferred. Putinomics saw Russia through the crisis, but it failed to lay the groundwork for a return to growth. From Crisis to Crisis | 115 Foreign Tensions Rise When Vladimir Putin traveled to Beijing in August 2008 to celebrate China’s first Olympic Games, it is unlikely that he had war on his mind. The Beijing Olympics were widely seen as a coming-out party for China, evidence that the Western powers could no longer write the rules of global order alone. Now the BRICS—Brazil, Russia, India, China, and South Africa—were rising .America,theglobalhegemon,wasmiredinMiddleEasternwarsandwas slipping toward a financial crisis. The U.S. investment bank Bear Stearns had gone bust in March 2008, and Lehman Brothers, whose collapse in September would freeze U.S. financial markets and push the country and the world into recession, was just weeks away. A country as integrated into the global financial system as Russia was not immune to such shocks. Visiting Beijing, however, Putin had reason to think that history was on his side. If the collapse of the Soviet Union had proven that economic decline makes geopolitical retrenchment inevitable, Putin intended to show that the reverse was also true. Russia’s rising wealth should, he believed, be reflected in the country’s geopolitical standing. During the early years of Putin’s presidency ,themainsecurityquestionwasChechnya,whereaviolentinsurgency and brutal counterinsurgency had destroyed the province and facilitated the riseofjihadistterrorists.TheU.S.WaronTerrorafterthe2001attacksinNew York and Washington, D.C., therefore corresponded with the Kremlin’s own foreign policy goals. By the mid-2000s, however, Russian leaders had come to see increasing contradictions between their aims and the policies of their Western neighbors .TheWestsupportedprodemocracyandanticorruptioneffortsincountries such as Georgia and Ukraine (as well as in Russia), countries that the Kremlin considered part of its sphere of influence. At times, the West supportedgroupswhotooktothestreetstopressuretheirgovernments ,funding investigative journalists, for example, and training civil society activists. In 2003, an American-educated lawyer, Mikheil Saakashvili, led protests that toppled Georgia’s decrepit president Eduard Shevardnadze, who had governed Georgia since the Soviet period. The following year, Western-backed protests against a fraudulent presidential election forced Ukraine’s authorities to allow a new, fairer vote, which brought to power Viktor Yushchenko, a Western-leaning politician with an American wife. These protest movements were cheered in the West but were primarily driven by locals fed up with corruption and stagnation. In the Kremlin, however ,Georgia’s2003RoseRevolutionandUkraine’s2004OrangeRevolution 116 | From Crisis to Crisis Percentage of GDP 0 6 1 2 3 4 5 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 Year were seen as CIA plots to install pro-Western regimes on Russia’s doorstep. In the mid-2000s, the Kremlin began mobilizing to prevent “color revolutions ”—popular, antiregime street protests—from spreading to Moscow, funding a variety of progovernment and reactionary groups and investing in the military.1 Though Putin saw restoring Russia’s geopolitical stature as a key goal, this was not...


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