Russia will increasingly dominate the geopolitical scene of the Former Soviet Union in 2017.
PUTIN’S WESTERN PROPAGANDA VICTORY
2016 was far kinder to Russian President Vladimir Putin than most other world leaders. Despite a weak economy, Mr Putin notched up some impressive foreign policy successes (particularly in Syria), consolidated his party’s support in legislative elections, and played a key role in negotiating an OPEC production cut – the first in over a decade.
However, the Russian leader’s greatest strategic success has come from the polarised state of many of the West’s liberal democracies. For years, Mr Putin has decried the West’s projection of liberal values on various parts of the world, such as Iraq, Georgia and Ukraine, as a feckless and disingenuous attempt to contain Russia and its allies. In 2017, the Russian leader will be hoping that the recent rise of vitriolic populism in the West will serve to further weaken the supposedly universal appeal of liberal democracy.
The emergence of right-wing populists in Europe and the US, who share some of Putin’s values, represents a profound shift in Russia’s favour. President-elect Trump appears to be courting Vladimir Putin’s favour and has promised that the two powers can and will work together on important geopolitical issues. Perhaps most important of these situations is the war in Syria, where Trump appears to favour cooperation with Moscow against extremist Islamist groups. .This could be common ground to push for a broader deal on Syria, although its effectiveness will be questionable.
France’s two likely presidential candidates have also espoused policies that focus on improving relations with Russia. Francois Fillon and Marine Le Pen both view coordination with Moscow on anti-ISIS operations as essential pillars to their foreign policy doctrines. Both have also been critical of NATO, which Russia views as its greatest security threat; a weakened French presence in NATO would greatly undermine the alliance’s strength.
Moscow has not been neutral in these developments. The CIA accused Russia of meddling in the US presidential election in favour of Mr Trump. Mrs Le Pen’s party has been seeking loans from Russian banks close to the Kremlin; it was financed by such a bank in the 2014 parliamentary election. German politicians have also warned that Russian hackers may seek to manipulate its election in 2017.
Though much of the evidence for these accusations remain state secrets, Russian activity in these areas would not be a surprise; if the CIA claims are correct, Moscow helped install a Kremlin-friendly US president at relatively low cost. It would make sense for Mr Putin to continue this approach in 2017.
RUSSIA’S ECONOMY: BETTER BUT NOT GOOD
Russia’s economy has been mire in recession for the past two years, hit by low commodity prices, structural issues and economic sanctions. However, the economic outlook for 2017 looks markedly better, with global oil prices seemingly finding a floor and Western economic sanctions likely to ease slightly.
While the EU extended Russian sanctions in December until July 31, 2017, the potential for further extensions looks uncertain. Talks between EU states on extending the measures will begin in June, when a Moscow-friendly leader is likely to have taken power in France. With support from other EU members sympathetic to the Kremlin, particularly Hungary and Slovakia, the EU consensus on extending these sanctions is likely to falter. While a complete lifting of economic, financial and travel-related sanctions is unlikely, Russia is likely to gain some reprieve on the most stringent measures.
Meanwhile, a sustained rise in the oil price to above $50 a barrel will increase economic activity, which has been stuck in reverse since January 2015.
Despite this, the Russian economic picture is by no means a rosy one. The country has substantial structural economic and demographic issues which, if not remedied, will be disastrous in the long term. Even with the expected uptick in economic activity in 2017, the Kremlin will continue to pursue austerity measures, providing a bleak outlook for much of the population.
PUTIN GEARS UP FOR REELECTION
Towards the end of 2017, Vladimir Putin will begin preparing for presidential elections in March 2018. The lead up to this campaign is likely to be peppered with protest movements, which in turn will be met by a security clamp down.
If possible, Mr Putin will announce a limited increase in the government third and fourth quarter spending, likely on social programs. Infrastructure works in preparation for the 2018 FIFA World Cup will also be in full swing.
This will also be the period where a deal on the Syrian conflict is most likely to bear fruit – the Russian leader will need all the foreign policy victories he can get to distract the population from a stagnant economy.
‘BLACK SWAN’ EVENTS
- Conflict may break out again between Armenia and Azerbaijan over the disputed Nagorno-Karabakh territory. The frozen conflict turned hot in April 2016 but, with Russia mediating, a ceasefire was promptly agreed to. Since then, talks between the two countries have resulted in a strengthening of ceasefire monitoring systems. While skirmishes are likely, full-scale conflict is not.
- Large-scale unrest and volatility in Kazakhstan may lead to the overthrow of its 76-year-old leader, Nursultan Nazarbayev. The Central Asian state saw labour unrest in 2016 and protests against proposed land reforms. In addition, an estimated 500 Kazakhs are fighting for extremist Islamist groups in Iraq and Syria, many of whom are likely to try to return in the coming year as these groups lose territory. This combination could spark ugly scenes; however, with a strong security service and positive economic outlook, widespread and uncontrolled unrest is very unlikely.
- Ukraine and the Baltic states, which include Latvia, Lithuania, and Estonia, may be the targets of increased Russian aggression in 2017 as Mr Putin seeks to take advantage of Kremlin-friendly leaders in the US and France to expand Russia’s sphere of influence. However, Mr Putin is unlikely to press his military advantage too much while he retains the diplomatic upper hand. Instead, a resolution to the Ukrainian crisis, one that favours Russia, is more likely to eventuate in 2017.