New sanctions against Russia directly target Putin and his inner circle. How will he fight back?
When Time made Vladimir Putin, the autocrat who institutionalized a system of corruption and relentless persecution of political rivals in post-Soviet Russia, their Man of the Year, the magazine had to explain to readers that the title goes to the year’s most influential person rather than the most admired. That was a decade ago, and the corrupt empire that he built by force, populism, and shrewd manipulation of his opponents, still trudges on, and he’s still in charge and actually popular with many of his people, even if they know he and his crew are stealing their future.
This has given many observers in the West two general notions of Putin and his grasp on power. On the one hand, he’s presented as a mastermind with absolute control of the Russian state and near infinite wealth hidden in a thousand bank accounts in dozens of nations. On the other, a D-list agent who got incredibly lucky, and whose grip on power is constantly precarious while the nation’s oligarchs conspire to usurp him when he’s no longer the useful figurehead he is today.
As we said before here at Rantt, neither view is entirely correct. The truth is somewhere in the middle. Putin is most certainly a mastermind, but he’s not really able to snap his fingers and get anything he wants done. Sometimes, just a whim is all it takes. Other times, his lieutenants struggle with the task or abuse his directives to enrich themselves on the side. Putin’s rule, much like Russia itself, is imperfect and imprecise. The system sort of works, but it isn’t exactly a well-oiled machine capable of anything it puts its mind to, at least not anymore.
This was probably at its most obvious just a few years ago when Russia was more or less a pariah state called “a gas station that sells AK-47s” and Putin was being browbeaten, isolated, and ran out of the G-20 Summit in 2014. Hit with sanctions and faced with a scolding, expanding NATO, he fought back through intelligence operations, propaganda, and troop maneuvers to warn the world that Russia was still there and still dangerous. But today, only a year after he actually started making gains, his success seems short lived as a new package of sanctions is set to hit him and his inner circle directly.
The big question is what happens next. Will Putin double down and try to escalate tensions, throwing his massive nuclear arsenal around? Will there be a wave of hacks as propaganda wars intensify? Are we going to see him turn to organized crime groups to carry out hits on informants and rogue journalists who know too much? Well, before we get carried away with a lot of hypotheticals, let’s take a look at what he can realistically do given his resources, the state of his economy, and operating in what is a fairly hostile international climate that has little positive to say about him.
When Power Becomes An Illusion Of Choice
Unfortunately for Putin, he doesn’t have that many options for retaliation in no small part thanks to the sanctions. Like many autocrats, he buys loyalty with offers of political power and compensation often hidden in an offshore account or some complicated legal structure to hide the true origins of the assets in questions. With the sanctions cutting off access to said assets and making it much harder to move around cash, stocks, and real estate, there will be less for Putin to offer his henchmen.
That was basically the whole point of the Magnistky Act, to cut down how much Putin’s graft machine can offer while simultaneously making it more difficult to reclaim their laundered money and cash. But the new round of sanctions doesn’t just go after what was already embezzled. It targets all sorts of relationships and joint ventures that could be used to fund covert operations, engage in large scale money laundering, and provide help to Russian companies working with, or controlled by oligarchs.
Basically, they back Russia into a corner and red flag virtually every tool used by those in power to reward dirty jobs and enrich themselves from exploiting their natural resources using enterprises created through very suspicious government auctions. And with less to offer, fewer henchmen would be willing to take the risk, especially if they’ll be trapped either in Russia or Eastern Europe after their involvement is discovered. Some may even be willing to make deals to recover some of their assets now frozen across the Western world and under constant guard.
When Crime Doesn’t Pay (As Well As It Used To)
The next time Putin wants to silence an informant or flex his muscle, his options may be severely restricted. As already noted, despite the caricature of him as a mighty puppet master who can snap his fingers and get things done, his powers are far from absolute. Of course what sway he has is very significant, but just like in any government operation, there are a lot of moving parts, and with less cash to grease them, the result may be of lower quality than desired or run into unexpected problems that would’ve never surfaced before.
One of his easiest ways to keep silencing informants through intimidation or outright hit jobs would be to turn to criminal organizations to do the work. Russian intelligence has already done this, but the gangsters they’ll have to enlist now may not be as well connected or as capable. Jobs may become a fair bit sloppier, and law enforcement intimidated, bribed, or just pressured to look the other way, may be looking at fewer consequences for pursing the case, or less reward for letting these matters drop.
For example, the widely suspected hits on Putin’s targets in the UK and the suspected murder of an informant in D.C. are thought to have been swept under the rug because wealthy and connected Russians could’ve made an unpleasant diplomatic mess or pulled a lot of money from the countries in question when their nation denied any involvement. But with less money to pull out and far less diplomatic leverage, what would be the incentive not to rock the boat unless airtight proof is found?
Why It’s Hard To Grow A Trickle Down Kleptocracy
All right, so if external sources of money are now questionable at best, what about an investment into Russia’s economy to raise more cash internally? It might have worked when oil was still north of $100 per barrel, but certainly not today when it’s trading between $45 and $50. Russia’s other natural resources are also in lower demand and have to be extracted from a fairly harsh landscape in a very rough climate, requiring billions in cash and years of hard work to get mines and wells up and running.
But what about something outside of mining and fossil fuels? Doesn’t Russia have a hyper-literate population well trained in computers and engineering? Technically, yes. However, one of the side-effects of living in a kleptocracy is that pervasive corruption undermines any effort to make any new industry or reforms. Just look at the Sochi Olympics for an example of how virtually everything in Russia runs today. Corrupt officials and entrepreneurs in bed with them feast on payments and cut corners when it comes to anything, no matter how important and high visibility, or minor.
The graft was so pervasive that current Russian prime minister and former president in a game of musical chairs, Dmitry Medvedev, ended up with a 45,000 sq. ft. mountain chalet out of the Sochi Olympic fund. That chalet, on paper, is operated by a trust established to “promote winter sports” but functions as his retreat, guarded by Russian special forces paid with rubles collected from Russians’ paychecks. This is just how the government there operates; the corruption is built into the foundation of any project.
So it’s not a big surprise that Medvedev’s effort to create a Russian analog to Silicon Valley hasn’t exactly paid off after years of seemingly hard work. And anything that would be created from any effort to jump-start the moribund national economy would still end up going to oligarchs and their friends, so it’s not exactly going to reverse the decline in GDP growth Russia has been seeing since 2010, during which its economy contracted by 7.8%.
Without very serious reforms to weed out corruption and a hotter fossil fuel market, the country’s wealth can’t grow, but without corruption, Putin and his friends wouldn’t be able to hold the same kind of power they do today, and might even find it difficult not to have to sacrifice one of their own in a public trial to demonstrate some sort of responsibility to win public trust.
Keeping The Dogs Of War On Their Leashes
Now, all this might make it seem as if Russia has little choice but to ramp up its military provocations. They’ve been buzzing borders and planes, rattling sabers, and low key threatening NATO members since Trump’s inauguration, as well as tried to overthrow a government in the Balkans before it joined the alliance, so why wouldn’t they just step it up? Well, Russia understands its limits, and despite well-publicized tales of neglect and poor security in its nuclear facilities, its military has proven to be very deliberate about going to war with capable adversaries and wise custodians of their nukes.
One of the biggest problems with escalating their fiery rhetoric with NATO lays in — you guessed it—corruption. Trillions of rubles siphoned off over nearly 30 years have definitely left the Russian military less formidable than it should have been right now. Knowing this full well, Putin has kept an iron grip when it comes to the nation’s nuclear deterrent and picked on countries that would have problems defending themselves effectively.
This does not mean that we can take the Russian forces lightly, however. They’re still a global power that has to be reckoned with, commanding an impressive naval fleet, powerful air force, excellent special forces, and yes, their nightmarish nuclear triad designed to level nations. Only Americans can really consider going toe to toe with them, but knowing that it will not end well for much of the planet, neither nation has, and really shouldn’t, have a taste for an actual kinetic engagement.
The United States aside though, Putin has very little interest in a war with a serious NATO power like France or the UK, and no matter how he spins it on Channel One or RT, it’s hard to imagine this move would be too popular at home, where people want reforms to fight corruption, not wars with other nations over Putin’s inner circle not being able to use an ATM in New York or wire a million dollars to a trust in the Cayman Islands.
Putin’s “Patriotic Hackers” May Be Hitting Their Limits
In addition to targeting revenue streams for Russian oligarchs and many of their partners in a sort of Magnitsky Act on steroids, the sanctions package also goes after cyber operations. Anything seen as compromising American cyber security is now going to get investigated and slapped down as part of the sanctions’ enforcement. However, since cyber operations are relatively cheap and many of them rely on disseminating propaganda and everyday hacking, it probably won’t deter Russia from doing more of it.
Conceivably, Putin could step up cyber operations, but the problem is that he’s either very close to the limit of what he can do, or has already reached it. It’s hard to get into well-protected systems and if companies follow their best practices and do real security audits, it will be very hard for hackers to get any dirt or actionable intelligence. There is a finite number of exploits after all, and the way to combat them is to do the same as you would do to deter common criminals, terrorists, or casual hackers.
Same goes with his propaganda. With much of the West referring to RT and Sputnik as nothing more than Putin’s mouthpieces and the channels’ denials of this savaged on social media, by Russians no less, it’s hard to imagine the fake news they manufacture will have the same impact it did six months ago unless you’re a devoted conspiracy theorist or a Trump backer. But while he almost certainly is looking at diminishing returns, this seems the only logical option for him to pursue.
They Wanted What’s Better, But It Turned Out As Always
One of the most bizarre things about the Russian experience is that instead of moving forward, the country and its people seem stuck on the treadmill of history. It’s not really taking them anywhere new and their best-laid plans often seem to backfire, leading to expressions such as the one above being disturbingly common. Putin may well have wanted a transactional, short-sighted American president who only cares about money and tried his best to help this happen despite his contradictory and unconvincing denials.
Maybe he even had his spirits lifted when his half hour meeting with such a president at the G-20 Summit lasted more than two hours, and then led to skulking in the shadows for another hour at dinner. He may have even been buoyed by Tillerson’s inaction and behind the scenes dismantling of Foggy Bottom, the seat of the once formidable State Department, a central figure in his media’s conspiracy theories about the Arab Spring, color revolutions in post-Soviet republics, and even unrest in Moscow.
Before the meetings he seemed nervous about where America would go, a few opinion pieces here and there hinting that he and his staff thought an embattled Trump wouldn’t be good for much. Now, with the sanctions bill forcefully pushed onto Trump’s desk with limits on his power to dial them back baked in, and the increasing public frustration with his dawdling in signing it, his fears seem to have come true.
Make no mistake, this is very much a vote of no confidence in Trump being able to handle affairs with Russia, as is the pushback for his almost servile attitude towards Putin and his inner circle, and tantrums against this bill.
But as we just reviewed, Putin’s options for retaliation are extremely limited by both the fallout from his kleptocratic ways, and by American design. This is why the Russian media’s tone is one of a heavy sigh, telling Russians they will have to tighten their belts and get used to a worse economy because apparently, the West can’t decide what kind of relationship it wants to have with Russia. However, their source for this assertion consists of a few spins on Trump’s passive-aggressive statement about how he could make a better deal with Russia than Congress.
So it looks like what we’re going to get from Russia will be more of the same while Americans sort out what’s going on in the executive branch and get on the same page with NATO once again. Ultimately, it’s Americans who can do a lot more damage to their own country than Putin could with his dwindling soft power. Rather than worry about retaliations that are very unlikely to go past expelling diplomats and closing a few compounds — actions on which Trump curiously and uncharacteristically stays silent — while throwing some shade at Trump and Congress on Twitter, we should worry about how we’re going to return to sane bipartisan politics at home.
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