Russia: We Are Back!

Over the Labor Day, Russian President Medvedev laid out five points that will define Russian foreign policy ahead – loosely as I understand it – 'We're Back'. This is critical point of view as the geopolitics of Russia would have significant implications from energy prices, commodity markets, and trade patterns.

Ever since the collapse of Soviet Union, it has been a social catastrophe, far from being ruled by intellectuals; it was being ruled by thugs, running as if they were Americans. The pride of once powerful Soviet Union could not be simply ignored. In all of this, there are underlying momentum to create the conditions for cultural renaissance and it is within this context that Russia is back for it once not to be socially ostracized following the end of Cold War.

As I see it, as the Prime Minister Vladimir Putin and President Dmitri Medvedev are shaping things up, social structure is once again going through a round of massive reorganization, free expression is being tempered etc. All this means that a state would not longer ruled by the market, instead the market is submitting to the state.

It is not a surprise to me if Russia's borders aim to be at its height looked more like the Soviet Union than they looked like Russia today. And that could make Russia to be extraordinarily powerful. If anything to go by, the recent clashes with US-allied Georgia are a sign towards a greater confrontation with its former union members. Already, the pain is immediately felt by Turkish exporters, who are facing risk of losing market due to delayed orders.

I will put it this way - Russia's mood has reached the kind of "historically unprecedented, positive extreme", and as Russia is celebrating explosive economic growth, huge oil revenues, and the "heroic" leadership of Vladimir Putin, its desire to reclaim the resources of satellite states lost upon the collapse of the U.S.S.R. make future border conflicts likely. The ethnic diversity within these states represents conflicts-in-waiting for the xenophobia that attends bear markets.

Vladimir Putin is assembling an economic machine powerful enough to force Europe, the US and Asia to their knees. Europe is importing around one-third of its natural gas from Russia. Imagine this - China is hungry for more natural gas. Russia changes the flow of its pipelines, channeling more to China and less to Europe, without any drop in its own revenue. Europe's industrial costs rocket, home heating becomes exorbitant and the EU economy collapses. That event will make the mid-1970s OPEC crisis seem trivial. In 1979, with oil prices at historic highs, the Soviet Union swaggered into Afghanistan. In 1991, with oil prices at record lows, the Soviet empire disintegrated. With oil now in a sustained boom, Russia is once more showing its claws.