NB: Next week’s Russia Analytical Report will appear on Tuesday, Oct. 9, instead of Monday, Oct. 8, because of the U.S. Columbus Day holiday.

This Week’s Highlights:

• The dirty secret is that the Russian economy has become well-insulated against sanctions, writes Carnegie Moscow Center scholar Andrey Movchan. Moscow’s foreign currency reserves have recovered; Russia’s sovereign debt levels are eminently manageable, accounting for a mere 17 percent of its GDP; and the 25 percent drop in the currency so far this year is actually a blessing for the state budget, according to Movchan.
• If the new generation of Putin-appointed “technocrats” comes to dominate Russia’s politics, writes Kennan Institute senior fellow Maxim Trudolyubov, then, to quote Ivan Krastev and Gleb Pavlovsky, “Russia would be a country governed by McKinsey consultants who are loyal to Putin and will preserve his policies once he is gone.” However, the setbacks that the Kremlin has suffered in the past gubernatorial elections indicates that the Kremlin may not be able to fill all the important positions with "McKinsey consultants,” according to Trudolyubov.
• While Russia’s special services are still formidable in the age of Putin, writes Carnegie Moscow Center senior fellow Alexander Baunov, they are no longer the elite they were in Soviet days nor the modernizers they were during the rule of Peter the Great. Today, Russia’s modernizing class is located elsewhere: in IT companies, financial institutions, law firms, construction enterprises, aerospace corporations and petrochemical companies. It is they, not the spying agencies, that attract the brightest and the best, according to Baunov.
• In an interview following the Vostok-2018 wargames, Russian Defense Minister Sergei Shoigu referred to the Chinese participants as allies, writes defense analyst Michael Kofman. While it’s difficult to interpret the military exercise as proof of alliance, it is clear the two countries, pushed toward cooperation by U.S. actions, want to demonstrate that they do not see each other as a threat, Kofman writes.
• The consensus among Western foreign policymakers is that Ukraine is on a positive trajectory, while Russia is on a negative one with time running against Moscow, according to Keith Darden of American University and RAND’s Samuel Charap. Both analysts find this assessment overly optimistic, writes Mark Munson of The National Interest, as Ukraine is plagued by deeply ingrained corruption and regional division. As for Russia, it has mostly recovered from its 2014–2015 economic recession due to fiscal belt-tightening and rising oil prices, according to Charap.

I. U.S. and Russian priorities for the bilateral agenda

Nuclear security:

• No significant commentary.

North Korea’s nuclear and missile programs:

• No significant commentary.

Iran and its nuclear program:

• No significant commentary.

New Cold War/Sabre Rattling:

• No significant commentary.

NATO-Russia relations:

• No significant commentary.

Missile defense:

• No significant commentary.

Nuclear arms control:

• No significant commentary.

Counter-terrorism:

• No significant commentary.

Conflict in Syria:

“Russian-Israeli Conflict in the Skies of Syria,” Paul R. Pillar, The National Interest, 09.25.18: The author, a contributing editor at the National Interest, writes: “The sudden ruffling of Israeli-Russian relations over the accidental shootdown by Syria of a Russian surveillance aircraft … is the sort of incident apt to happen when a modus vivendi joins parties with much different perspectives, one of them broad and the other narrow. Russian President Vladimir Putin has the broad perspective. His policies … are part of a strategy of making Russia an important player throughout the Middle East. … Russia talks with everybody and does not allow any rigid division of the region into friends and foes to constrain its diplomacy. … The Israeli government of Benjamin Netanyahu … has the narrower perspective of seeking to throw its military weight around outside its borders with impunity. … Last week’s incident, however, had more to do with Israel’s propensity for seeking absolute security for itself even at the expense of absolute insecurity for others. … The upgrade of Syrian air defenses will complicate but not stop the Israeli attacks. … But both Russia and Israel will continue to have the same reasons as before to do business with each other.”

“To Russia With Love: For the first time in years another state is saying to Israel: Stop right there. At least in Syria, that’s the end of it. Thank you, Mother Russia” Gideon Levy, Haaretz, 09.28.18: The author, a columnist for the newspaper, writes: “A ray of hope is breaking through: Someone is setting limits on Israel. … Israel needed someone to set these limits like it needed oxygen. … The Israeli stupefaction at the Russian response [delivery of S-300s to Syria] and the paralysis that gripped it only showed how much Israel needed a responsible adult to rein it in. … Israel Hayom reported, of course, that anti-Semitism is growing in Russia. Israel is getting ready to play the next victim card, but its arrogance has suddenly gone missing. … Every state is entitled to have weapons for defense against jet bombers, including Syria, and no state is permitted to prevent that forcibly. This basic truth already sounds bizarre to Israeli ears. The idea that other countries’ sovereignty is meaningless, … that Israel can mix in the affairs of the region to its heart’s content … without paying a price … has suddenly run into a Russian ‘nyet.’ … Russia has outlined for the world the way to treat Israel, using the only language Israel understands. … The air force will think twice now and perhaps many times more before its next bombardment in Syria, whose importance, if indeed it has any, is unknown. … Had such a Russian ‘nyet’ hovered above Gaza’s skies, too, so much futile death and destruction would have been spared.”

Cyber security:

• No significant commentary.

Elections interference:

“Russia Is Trying to Influence the 2018 US Election. But This Time the US Is Prepared,” Alla Baranovsky-Dewey, The Washington Post’s, 09.26.18: The author, a PhD candidate in government at Harvard University, writes that “a nation like Russia is most likely to launch an informational attack when two sets of factors align. First, the attacking state must have enough information resources to launch the attack. Second, its target must be sufficiently vulnerable to make the effort worthwhile. … Russia's resources for conducting another attack are all still there, and the United States still has many of the same vulnerabilities … But the United States is now also anticipating and preparing for Russian intervention. That will probably reduce the magnitude of the attack and its eventual effectiveness.”

Energy exports from CIS:

• No significant commentary.

U.S.-Russian economic ties:

• No significant commentary.

U.S.-Russian relations in general:

“New Sanctions Won’t Hurt Russia,” Andrey Movchan, Foreign Policy, 09.26.18: The author, a nonresident scholar at the Carnegie Moscow Center, writes: “The dirty secret is that the Russian economy has become well-insulated against sanctions. … Moscow’s foreign currency reserves … are now at an all-time high of almost half a trillion dollars. … Although Western politicians love to talk about the falling value of the ruble, the 25 percent drop in the currency so far this year is actually a blessing for the state budget. … Russia’s sovereign debt levels are eminently manageable, accounting for a mere 17 percent of its GDP (as of 2017), or approximately 50 percent of reserves. … The state’s relentless domination of the economy provides the Kremlin with additional protection. … The Kremlin has wasted no time exploiting the sanctions regime for political purposes. … The sanctions have dramatically reduced capital flight from Russia. … The country’s unpopular (and, arguably, unnecessary) pension reform is also being blamed on the West … Crucially, the sanctions have put serious pressure on Russian asset prices. … Imposing sanctions on various oligarchs simply drives them closer to the Kremlin. That’s because there is no true ownership of companies in Russia, only temporary management. … [T]he government is betting that the West won’t cut off such sales [exporting hydrocarbons and other raw materials] since the negative impact would be felt first and foremost by European consumers. Russia could also be vulnerable to restrictions on critical imports of advanced technology and equipment.”

“The World Is Laughing at President Trump,” Daniel W. Drezner, The Washington Post, 09.26.18: The author, a professor of international politics, writes: “The world laughed at President Trump's bogus claims of foreign policy accomplishments. U.S. allies are working closely with Russia and China to find a way to evade U.S. financial sanctions on Iran and in the process are laying the groundwork for weakening the role of the U.S. dollar in the world. … The world neither respects nor fears the president of the United States, and it sure as heck doesn't like him. None of this advances the national interest whatsoever.”

II. Russia’s relations with other countries

Russia’s general foreign policy and relations with “far abroad” countries:

• No significant commentary.

China:

“Assessing Vostok-2018,” Michael Kofman, Russia Military Analysis Blog, 09.28.18: The author, a senior research scientist at CNA, writes: “China’s Minister of Defense … highlighted the importance of Sino-Russian cooperation at the operational and strategic level [after the Vosktok-2018 wargame] while [Russian Defense Minister Sergei] Shoigu announced that they had agreed to hold exercises regularly in the future. In a subsequent interview, Shoigu referred to the Chinese participants as allies. While it is difficult to interpret Vostok … as a proof of a budding Sino-Russian entente, it is clear the two countries seek to demonstrate that they do not see each other as a threat. … Alliance formation behavior takes place as a form of balancing behavior in response to threats, therefore the only logical catalyst for a Sino-Russian entente is the threat posed by the United States, and the extent to which the two countries see their respective challenges as worth the risk and liability of closer cooperation. … Having identified both countries as great power competitors in the National Defense Strategy, and practical measures to intensify the confrontation in economic and military domains, Washington has taken important steps to further enhance cooperation between its disparate adversaries. … Russian policy has become rather more deft in managing their ‘strategic partnership’ with China, seeking to leverage military events as part of a boarder effort to slowly and incrementally pull the latter into a balancing entente against the United States.”

Ukraine:

“Dark Days Ahead for Ukraine,” Mark Munson, The National Interest, 09.21.18: The author, a U.S.-Russia relations intern at the Center for the National Interest, writes: “During a panel at the Center for the National Interest … Keith Darden [of American University] … said that the consensus among Western foreign policymakers is that Ukraine is on a positive trajectory, while Russia is on a negative one with time running against Moscow. … Both Darden and [RAND’s Samuel] Charap made the case that this overly positive assessment is not borne out by Ukraine’s domestic or international situation. Darden noted that Ukraine remains ‘regionally divided in a way that threatens its territorial integrity.’ Another challenge is corruption … Charap called in to question three assumptions about Ukraine’s external environment. Firstly, it is believed that Russia will weaken, which will buttress Ukraine’s viability as a state and push it closer to the West. … Secondly, many assume that the West will maintain unity in applying economic sanctions that pressure Moscow … Thirdly, it is hoped that the Ukrainian military has become more effective and efficient. … The speakers also raised a series of questions that suggest Ukraine has a challenging road ahead. … Charap urged Western policymakers to adopt ‘a sense of urgency’ in seeking a settlement of the Ukraine conflict.”

“Where Putin's Meddling Has Backfired,” Anne Applebaum, The Washington Post, 09.23.18: The author, a columnist for the news outlet, writes: “Four years have now passed since the invasion, and the 1.5 million Ukrainians displaced by the war are coping better than might be expected. … The integration of the Donetsk refugees into schools and communities in the central and western parts of the country is also part of a broader story: the integration of the war into the consciousness of Ukrainians. … Slowly, the never-ending conflict is altering attitudes here, leading to … the separation of two countries that have been part of the same empire for centuries. … Even personal ties are fading … Russian cultural influence … is also disappearing, partly thanks to official decisions. … It is ironic that the Russian invasion … has pushed the country in a dramatically different direction. It's also a reminder that the supposed strategic gifts of Vladimir Putin … are in fact very limited. His interference in Ukraine has made a once-friendly neighboring country into an enemy.”

“Resolving Ukraine’s Orthodox Church Crisis. Struggle for Ukraine,” Alexander Zanemonets, Carnegie Moscow Center, 09.25.18: The author, a professor of Byzantine studies with the University of Haifa, Israel, writes: “Ukraine’s Orthodox Christians have now split into three groups that have complex relations with each other. The Ukrainian Orthodox Church is the largest Orthodox denomination in today’s Ukraine. It is often referred to as the Ukrainian Orthodox Church of the Moscow Patriarchate (UOC MP) … The so-called Kyivan Patriarchate (KP) is the second-largest Ukrainian church. … The rest of the Orthodox churches … never recognized the Kyivan Patriarchate, and continued to deal with the UOC MP … The third Orthodox community in Ukraine is the Ukrainian Autocephalous Orthodox Church (UAOC), which emerged after the 1917 February Revolution … Ukraine already has the autonomous Moscow Patriarchate Church. Soon, it might also have an autonomous Constantinople Patriarchate Church, putting it in the same situation Estonia has been in since the mid-1990s. The Moscow patriarch has threatened to sever ties with Constantinople if the Ukrainian Orthodox Church becomes autocephalous, but would probably refrain from doing so if the church only became autonomous. … As for autocephaly for the UOC, no one knows yet what ‘a canonic resolution in accordance with the existing pan-Orthodox procedure’ might look like.”

Russia's other post-Soviet neighbors:

• No significant commentary.

III. Russia’s domestic policies

Domestic politics, economy and energy:

“Is Putinism the Russian Norm or an Aberration?” Michael McFaul, Current History, October 2018: The author, a former U.S. ambassador to Russia, writes: “What comes after Putin? Decades more of Putinism? That seems possible, but unlikely. … In one plausible alternative future, Russia will not continue along the path of autocracy at home and anti-Western behavior abroad, but will eventually become a ‘normal’ country. Over a half-century ago, the sociologist Seymour Martin Lipset posited … [that] [a]lmost every democracy in the world today was ruled at one time by autocrats, but economic modernization eventually created permissive conditions for democratization. Russia today is … one of the wealthiest in the world that is not a democracy. Russian society is also very educated, urbanized and industrialized-other attributes of modernization … In Europe, Asia and Latin America, countries that modernized eventually consolidated democratic political systems, though it rarely went smoothly. Why should Russia be different? … A democratic Russia will not automatically seek or obtain closer relations with the United States or the West more generally. … But a more democratic Russia is more likely to develop closer ties with the West, and with the United States in particular.”

“Putin's Managed Democracy Falters,” Maxim Trudolyubov, Kennan Institute/The Moscow Times, 09.29.18: The author, a senior fellow with the Kennan Institute, writes: “While president Vladimir Putin keeps receiving credit for swinging the U.S. election for Trump, a supposedly trouble-proof political machine malfunction is taking place at home. Four regions that held gubernatorial elections in September have just voted the Kremlin's candidates down. On top of that … Putin changed three more heads of regions, disrupting the pattern of appointing ‘young technocrats’ that political analysts saw emerging after Putin embarked on his fourth term as president. … The people who are ‘winning’ elections are selected in an opaque but rigorous process operated by top Kremlin officials. … If the new generation comes to dominate, ‘Russia would be a country governed by McKinsey consultants who are loyal to Putin and will preserve his policies once he is gone,’ Ivan Krastev and Gleb Pavlovsky were quoted as saying this March. The latest electoral mishap suggests that the Kremlin may not be able to fill all the important positions with ‘McKinsey consultants:’ one can no longer be sure that even a highly controlled electoral procedure will produce the desired result.”

“Young, Liberal and Russian,” Zhanna Nemtsova, New York Times, 09.23.18: The author, founder of the Boris Nemtsov Foundation for Freedom, writes: “Being young and liberal in today's Russia is no easy feat. … Yet while many young Russians are fleeing a nation that has left them with little hope, some are determined to stay and fight. … The number of people emigrating from Russia to places beyond the territories of the former Soviet Union rose in 2016 to 56,730, up from just 14,206 in 2011, according to Russia's state statistics service. In addition, as liberal-minded Russians leave the country, more radical views are taking hold among the population that stays … Hidden in their [those with radical views] rhetoric is the potential for violence and chaos. … Human rights, democracy, the government's grip on power—everything is in danger if extremist views take root. As the Kremlin concentrates its energies on targeting Russia's peaceful young protesters and dimming their spark, perhaps it should remember that.”

Defense and aerospace:

“Russian 'Massive' Vostok-2018 Military Exercise: Not So Massive After All? Did Moscow inflate the numbers?” Nicholas J. Myers, The National Interest, 10.01.18: The author, a Russian and Belarusian military analyst, writes: “Moscow stated from the start that it [Vostok-2018] would be the largest Russian exercise since the legendary Soviet Zapad-81. On Aug. 24, Krasnaya Zvezda … claimed that 262,000 Russians were involved in the snap exercises of that week. … Vostok-2018 was indeed large, but it seems as many tricks were used to inflate its numbers as were used to deflate those of Zapad-2017. … Reconstructing exactly how many Russians did participate in the Vostok-2018 maneuvers is challenging to do with exclusively open sources, but can be attempted. … Taking the Ground Forces and Airborne Forces numbers at face value and assuming that all listed participating ships had fully-manned crews and that each aircraft had a total flight crew of twenty-five … the MOD figures suggest … a total figure of only 61,745 soldiers. … [A] generous inflation would boost the number only to 75,000. … An exercise 75,000-strong is nothing to sneeze at—even the 61,745 figure still makes this the biggest event of the past year by a significant margin for the Russian military. However, this is an extremely far cry from 300,000, raising questions about why the Russians would make such a claim. Most likely, Russia is merely trying to claim strength in the Far East to ensure stability … This would also explain Russia's decision to welcome China into its major eastern defense exercise.”

Security, law-enforcement and justice:

“An English Spire and Russian Spies: A New Post–Cold War Script,” Alexander Baunov, Carnegie Moscow Center 09.28.18: The author, a senior fellow at the Carnegie Moscow Center, writes: “The official Russian cover story for the two supposed sports nutrition salesmen, Alexander Petrov and Ruslan Boshirov, and their trip to Salisbury gets thinner by the day. … Even young, contemporary-minded Russians have come to believe by default that their intelligence services are the elite, the cream of the crop. … In reality, the intelligence services are not the cream of Russia’s crop and haven’t been so for some time. The military and national security agencies are often the main modernizers in developing societies when the survival of the state is at stake. … In Russia … [the military was the elite] under Peter the Great, Catherine the Great and Alexander I, when only the army was ‘European.’ But that epoch has long gone, and so has the Soviet era … Today, Russia’s modernizing class is located elsewhere: in IT companies, financial institutions, law firms, construction enterprises, aerospace corporations and petrochemical companies. … Of course, the special services are still formidable in the age of Putin, but they are no longer the elite they were in Soviet days.”