Upper Volta with Missiles — Overreach, Putin, and the Russian Crash

Starting out the new year with some additional notes on international affairs.

The reference in the title is from a comment from former German Chancellor Helmut Schmidt in once referring to the Soviet Union.  Of course, as Tony Judt noted in his magisterial book Postwar: A History of Europe Since 1945, there are those missiles.  Thus, this is a topic of concern to everyone, particularly in regard to the events surrounding Crimea and Ukraine.  This past April I noted the threat implicit in Putin’s actions and the need for European solidarity in opposing his actions to maintain the peace and stability of the region.  When combined with Russian violations of nuclear arms treaties this is cause for concern.

Since April much has happened, including measured sanctions by the European Union and the United States, to prevent the Russian Federation from leveraging its economic power to gain an advantage over Ukrainian sovereignty.  In addition, the depressed state of the world economy, among other factors, has created an oil glut that has also reduced Russia’s ability to leverage its oil reserves against any countries that would oppose it.  As a result, the ruble has taken a hit and Russia has made all of the wrong moves to bolster its currency.

On the middle point, certain notable voices here in the United States have pointed to an increase in oil production as the main cause but the numbers do not support this contention.  Instead, a combination of factors: alternative energy production, more efficient fuel consumption, and a drop in consumer demand have all conspired to, well, act as a market is supposed to behave.  Combine this with the refusal of major producers to reduce output to manipulate the market in order to prop up the price and you have what commodities do most often–rise and fall on the whims of the demand of the moment.  I have no doubt that eventually the world economy will recover, but keep in mind that the very real threat of Global Warming will continue to drive societies to find alternatives to fossil fuel.  That is, given that they continue to recognize the existential threat that it poses to humanity (aside from the dysfunctional geopolitics that fossil fuels seem to drive).  In the meantime, seeing the handwriting on the wall, net exporters like Saudi Arabia have little incentive to reduce production when they can sell as much as possible and gain a larger share of the market against their competitors.

For the uninitiated like Fifth Column blogger Patrick Smith at Salon.com, who apparently only sees conspiracies and control of a kind that–well–actually exists in Putin’s Russia, this is known as market competition.  Nary a peep from Mr. Smith has emanated lately (or from our own right wing plutocrats) about the Russian oligarch being a statesman running rings around our democratically-elected U.S. president or his decorated former U.S. Navy officer (and later antiwar activist) Secretary of State.  Were it only possible for the state controlled Russian press to have the freedom to make such alternative observations of its own leadership in their country.  Okay–enough sarcasm for today, but I think I made my point: mendacity and irrationality make for strange bedfellows.

Along these lines some interesting insights about Putin’s Russia have come out in the book entitled Putin’s Kleptocracy: Who Owns Russia? by Karen Dawisha.  This is a brave undertaking given that a lot of critical writing about Russia, apart from the abolition of a free press there, has been taken down from websites.  This is not because of some mysterious ability on the part of Putin and his cronies but because of their immense international (until recently) financial power and the expensive lawyers that such money can buy.  Cambridge University Press, for example, because of the U.K.’s lax libel laws, declined to publish the book.  Thus, a U.S. publisher had to be found.  In addition, Russia has bought off columnists and politicians around the world to muddy the waters about the reality of the regime.  A very enlightening review of the book and the history surrounding it appears in The New York Review of Books by Washington Post and Slate columnist Anne Applebaum.

In summary, Dawisha’s book demonstrates that during the period when Gorbachev was desperately attempting to reform a crumbling and inefficient system that had plodded along under the Brezhnev doldrums, that KBG agents like Putin were moving Russian currency assets aboard in Europe with the intent of eventually using their economic leverage to retake the country when all of the hullaballoo blew over.  Thus, rather than a failing attempt at liberalization and democracy, what we see is the reinstitution of authoritarian rule after a brief respite.  The same old corrupt elites that had run the old Soviet Union under central planning are now simply wearing capitalist oligarch clothing.  This probably explains why the Russian central bank is moving to bolster the ruble through higher interest rates, which will only exacerbate the economic collapse.  But the general welfare is not their concern.  It’s all about the value of Russian reserves and the economic leverage that such value and power lends to control.

Globalization has made this a small world, but one still fraught with dangers.  For companies in my industry and policymakers here in the United States, I would recommend that a wall of separation be established from companies–particularly those technology companies in information systems–with ties to Russian oil and its oligarchs.

“Evil Men Do As They Please. Men who would be good, they must do as they are allowed.”

The quote that provides the title to this post comes from a BBC television program named “Ripper Street.”  The episode concerned the moral dilemma when faced with the machinations of those who would do the world harm.  We find ourselves in one such dilemma.  Oftentimes art imitates life, but life also often imitates art.

For me at this point in history the dilemma that should be on everyone’s mind is Ukraine.

There has been a lot of bad history written about Ukraine lately that has made its way into the U.S. via the press.  This bad history tends to convey three messages.  The first is that the Ukraine has been part of Russia for centuries.  The second is that it doesn’t matter.  The third is that the U.S. has lost its legitimacy to address the issue because of its own foreign policy misadventures.

I will take the last point first because there was a lot of skepticism voiced in Europe, and on both the political right and left in the United States, about the President’s refusal to equate Russia’s actions in Crimea and Ukraine with Iraq.  This skepticism, I believe, is a knee jerk reaction by many who have other agendas, would obfuscate otherwise indefensible actions on the part of Russia, or with political axes to grind.

For my own part, I opposed from the start the military intervention in Iraq as wrong headed.  I felt that it was based on a neo-conservative expansionist ideology that was removed from reality, as most ideologies are. Years ago when I was a student at the U.S. Army Command and General Staff College I was fortunate to meet General Colin Powell during the heady post-Desert Storm/Desert Shield days.  His message to the class was that military officers must present a political as well as military solution to the civilian leadership.  I left his talk troubled because I thought the message was muddled and that there was danger in drawing the line between the political and the non-political.

General Powell had, of course, used this strategy during his career to advance to be Chairman of the Joint Chiefs of Staff, beginning in the Reagan Administration, and he was doing what all successful people tend to do: advise others to do as his did.  Later I expressed these reservations to the General personally.  His response was nuanced but still contained, I thought, a fatal flaw–he harked back to Clausewitz that war is the achievement of political ends through violent means, he emphasized that war was a last resort after all diplomatic overtures were exhausted, that world opinion was important in considering what action to recommend, but that in the end the President must be given a political as well as military solution.   It is this last that, I believe, contributed to his later loss of credibility given the disastrous and fact free U.N. speech regarding WMDs that bolstered the argument for military action in Iraq.  He should have recognized immediately the ridiculous proposition of mobile chemical and biological labs, been aware of the post-Air campaign assessments of capabilities, and the shelf-life of what they did have stockpiled.  But, of course, stating these facts allow for equivocation and evasion about “bad intelligence.”  Politics can both seduce and distort.  It can make a man with a distinguished career say things that he knows are foolish and later come to regret.  General Powell, of course, was only one part in the war’s sales campaign, and responsibility for the war and its outcome cannot be attributed to him.  His example is a cautionary tale.

But–and here is the big but–for all of their folly and dishonesty which caused real damage to the lives of millions of people as well as damage to the credibility and internal democratic processes of the United States, it was folly and dishonesty based on the realistic goal of eliminating a dictatorship from engaging in another genocide, and in the utopian goal of achieving self-determination and self-governance for the Iraqi people.  Saddam Hussein and his sons deserved their fates.  Shed no tears for those brutal psychopaths and their all too willing followers.  The invasion was supported by a significant number of countries in the international community.  Every step the United States took was done in public for all to see.  It is unfortunate that those in power did not see that they were overtaken by self-deception.  When the folly became increasingly obvious and the truth uncovered by both public institutions and the press, our institutions reacted and moved to recover.  It is one of the challenges of our time to determine how so many institutions constructed to prevent this type of folly utterly failed while things were playing out.  In the end, the balance of power has shifted in the region to the detriment of both democracy and modernism.  The sectarian strife that began with the insurgency continues to this day.

What the United States did not do is use the nationalistic pretext of English speakers in Iraq or the significant familial connections between U.S. citizens of Iraqi descent to argue for an invasion of annexation.  The United States did not engage Iraq for purposes of territorial expansion.  The United States did not post its troops in the first post-invasion, newly-elected Iraqi parliament in 2005 to dictate its agenda.  Iraq is now free to determine its fate, such as it is.

It is important to remember that in 2003 Iraq was a failed state ruled by a military dictatorship and, as such, had the potential to wreak a great deal of havoc in the region against its more stable neighbors, in particular, Turkey, Israel, Jordan, Saudi Arabia, and Kuwait.  The rulers of Iraq had invaded their neighbors, threatened Israel and engaged in terrorist anti-Semitic actions, engaged in genocide, and deployed its agents to assassinate a former President of the United States–the last an act of war in and of itself.

Given the events of 9-11, the people of the United States were in no mood to split-hairs or find nuance.  This harks back to a conversation I had with the daughter of a Middle Eastern diplomat back in 2000.  She asked if I felt that it was possible that there could be a terrorist attack here in the United States of any significance, given the first attempts on the World Trade Center in 1993 and the subsequent attempts to carry out other attacks that were thwarted.  I replied that it was indeed possible but that it would be the exception because it would be a grave error on the part of those who carried out the attack; that the American people, once aroused, would unleash a tremendous war of retribution at the perpetrators and anyone who seemed to give them aid, and that–as with all wars–there would be great suffering for the innocents in the crossfire.  Unfortunately I and everyone else who lived through these events were able to see this very scenario play out.

I can’t help but note that much of the criticism from the world community among our allies regarding Iraq are laced with crocodile tears, happy that the United States did the dirty work to address the mess that European imperialism bequeathed to the region.  Thus, to equate Russia’s actions in Crimea to the U.S. actions in Iraq is not only dishonest and wrong headed, it invites the charge that the speaker supports the fifth column tactics that have been used in the crisis thus far.  This is particularly evident in the writing of Patrick L. Smith over at Salon.com, who charged that Secretary of State John Kerry was ignorant of history in criticizing the actions of the Russian oligarch and went so far as crowning Mr. Putin as “a gifted Statesman.”  Unlike Mr. Smith, our Secretary of State only has the experience of living with the consequences of history by having actually served in a war and engaged in combat, in his case Vietnam, and then risking everything, including the ire of his fellow citizens, to clearly and eloquently state his case to oppose that war.  Unlike Mr. Smith and the oligarch he so clearly loves, our openly and freely elected president is constrained to act by both constitutional and international processes and institutions.

In terms of Ukraine’s significance, this is borne out by its history.  Ukraine was one of the most powerful nations in eastern Europe up until the 18th century.  It has long been considered the breadbasket of Europe and that has made it a region targeted for domination by a number of powers, especially since its fall as an autonomous power.  Poland, Russia (later the Soviet Union), Germany, and Turkey (the former Ottoman Empire) have figured most prominently in eying its resources and its strategic value as a pathway both to the east and west, and to the Mediterranean through the Black Sea.  It presently also possesses a robust industrial capability.  Its neighbors have partitioned its territories at various times in history.  In popular imagination this is the land of the Russ, Cossacks, and Tatars.  Given the number of nations involved in the region and its geographical position, Ukraine is an amalgam of the many ethnic and religious groups that have crossed its land.  The people there speak a combination of Ukrainian and Russian, given the mixed history of the region by the most dominant powers, but that doesn’t make them ethnically homogenous.  One idea, however, that the people there have often pursued and given their lives in the face of foreign domination is self-determination and self-government, with this hope being stillborn after the Russian Revolutions in 1917.

But in July 1990, with the unraveling of the old Soviet Union, Ukraine was finally able to achieve its independence–a move that was opposed immediately by hardline communists, who also attempted a coup against Mikhail Gorbachev.  With that immediate threat defeated, the young country held its first elections in December 1991.  Since that time it has faced challenges as all nations have–in particular it has grappled with the issue of internal corruption and the power of money to subvert democratic processes, not an unfamiliar problem among other nascent democracies and countries in the west.  Thus, for 24 years Ukraine has been a free and independent nation.  Crimea, which has been part of Ukraine during that entire time, has been a semi-autonomous region within the country, but it too has a history of Russian interference in its politics and autonomy.

For all of the talk of the west crossing lines and Putin being provoked, the fact is that Ukraine threatened no one.  The people of the country expelled President Yanukovych for abusing his power in trying to suppress the Euromaidan protests after he had been intimidated into taking a deal by Putin to walk away from talks for the integration of Ukraine into the European Union–an internal issue that was resolved peacefully with the democratic institutions in place taking control of the levers of power after Yanukovych fled to Russia.  Ukraine’s military is weak and its objectives are to establish a working representative democracy where its autonomy is preserved.

Obviously Russia considers these goals–a strong central organizing democratic republic with its autonomy safely within the European Union–a threat; and the reasons for viewing it as such lie in the manner that Russia treated the territories it formerly occupied.  Ethnic Russians and those speaking Russian, particularly under the communist regime, were favored elites.  Across eastern Europe, Moscow encouraged the emigration of its most ardent communist supporters to move to those countries and territories for the purpose of enforcing social and political control, often treating the existing populations as second class citizens and worse.  So the history that Mr. Smith would have the west endorse and accept is an artifact of totalitarian Soviet control and racism, which was a continuation of the Czarist police state system under different guise.  These so-called Russians living in Ukraine represent both an effective fifth column and a convenient pretext for territorial acquisition.

The purpose of NATO and the support for the European Union is stability and peace.  The targets of these institutions were not just aimed at the containment of the old Soviet Union, but also to ensure the autonomy of the countries in Europe against the recurrent nationalism that often led the world to war.  Since the fall of the old Soviet Union the focus of NATO and the EU has moved east.  In Eastern Europe, the major powers who competed for dominance were Germany and Russia.  A structured framework of nations in place there will prevent such a revival of animosities.  I am not sure if in the first third of the 21st century the continent needs a reawakened and militarized Germany facing a newly aggressive Russia.  Make no mistake, Poland and the Baltic states are watching what happens in Ukraine with great concern.

Mr. Putin is threatening the peace in Europe in ways not seen since the 1930s.  He has moved to do what he wants in those areas that he has sensed western weakness.  I am not certain if the west wants to go to war over Ukraine, and even if it did, whether it could sustain operations effectively or within the time needed.  But I suspect that a reckoning will have to be faced.

 

APolitical DoD Budget Blues – Part II

The folks at the Center for Strategic and Budgetary Assessments are hyperventilating about the contradictions in the 2015 defense budget submitted by the Administration.  At the center of their concerns is that the budget was modified at the last minute to propose an Army and Marine Corps end strength of 440-450,000 and 182,000 respectively, and Navy carrier levels at 11.

Instead, the Pentagon decided to propose $115 billion above the budget caps for DoD to support modernization programs with force levels at 420,000 and 175,000 for the Army and Marine Corps, with Navy carriers falling to 10.  This is the tradeoff that I highlighted in my last post on the budget–between the costs of sustainment for an aging standing force to meet immediate contingencies versus longer term investment to maintain the technological edge.  What bothers CSBA is the last minute change, which would need at least another $20 billion to fully fund.

Secretary Hagel has not explained the contradiction but what could it be that would cause the Pentagon to adjust its tradeoff at the last minute with an asterisk?  One word in my mind: Ukraine.  Perhaps several, including Chinese designs against Japanese territory, among other world issues that could destabilize national interests and lead to regional war–or worse.

Total discretionary (non-social insurance) spending is $1.014 trillion in FY 2015.  Of this, DoD spending is proposed to be $495.6 billion–about half.  Another $20 billion would represent 2% of the total discretionary budget.  So, given that the bill needs to be run through Congressional committee and the budget process, is it really necessary to go back to the drawing board when the CSBA suggests that the budget as it stands is probably DOA?  I think not.

Overall, for R&D programs, spending is up 1.7% above the previous fiscal year.  This is not a windfall by any means, nor does it restore things to pre-sequester levels.  But we are living through a period in American history of pretend penury.  The U.S. can more than afford to fund those needs to mitigate the effects of the great recession AND spend sufficient funds to protect the interests of itself and its allies today and into the future.  Even taking the growth projections of the Congressional Budget Office into account at 3% per year (given the CBO has been consistently wrong about such projections for almost a decade now), plus inflation of 2%, U.S. deficits in the range of 3 to 4% are sustainable well into the future.  If incomes were to keep pace with productivity gains, and with modest adjustments to revenues during periods of growth when full employment returns, the U.S. could easily begin to run budget surpluses as it did in the late 1990s.  We are still a very rich country.

I am not entirely convinced that comparing budget deficits and debt to a percent of GDP actually means anything.  If the frequent comparison to a household budget were to be equivalent to the spending patterns of Americans, U.S. deficit spending would be well above 100% of GDP, given the average mortgage, personal, and credit card debt held by private individuals.  With the debunking of Reinhart and Rogoff this tie, I believe, is even less valid.  Even if it did matter and R&R had not been so thoroughly proven wrong, much of what we project as debt is held by the public.  As Dean Baker has proposed, if there is a magic percent of GDP lurking out there that will suddenly cause our deficits to be unsustainable, Treasury could simply reduce the percentage through bond purchases.

Thus it appears that, if the Administration’s budget is at least used as a baseline, that there is much hope here that the U.S. maintains its technological edge while it attempts to figure out how to handle the next immediate crisis.  The risk to project management during the hearing process is that $20 billion will be carved out of R&D, which would negate the gains in the Administration’s proposal.  Thus, going into 2015, project managers will still need to be vigilant to find opportunities to substitute newer and less expensive technologies for old ones, and to aggressively use methods such as cost as an independent variable (CAIV) where they can.  Carry-over may once again be vital.

I’ll have more analysis as details emerge and the process works out.