Russia in 2045: a Scenario Analysis — Martin Kragh

2/2020

Russia in 2045: A Scenario Analysis — Martin Kragh

PUBLISHED BY THE SWEDISH INSTITUTE OF INTERNATIONAL AFFAIRS | UI.SE

Martin Kragh Head of the Russia and Eurasia Programme, UI

Project delivery ’RUSSIA’ within order FM2019-18671:1 for the Swedish Armed Forces

Content

Russia in 2045: Framing Different Scenarios ...... 3 The Political System ...... 5 Authoritarian model preserved ...... 5 Restoration of the constitutional order ...... 6 Regime disruption ...... 7 Economic Development ...... 8 No reforms, no change ...... 8 Economic reform ...... 11 Economic disruption ...... 12 Foreign and Security Policy ...... 12 Conflict ...... 13 Cooperation ...... 16 Disruption ...... 17 Concluding Remarks and Implications ...... 18

Russia in 2045: Framing Different Three different areas are considered in this study: the political system, economic Scenarios development, and foreign and security

policy. In each area, different scenarios and This study outlines possible scenarios for their implications are discussed. The analysis Russia to 2045. What happens in Russia will covers conditions where Russia is either have far-reaching implications not only for “bad” (authoritarian, belligerent) or “good” Russia and its people, but also for Europe (democratic, cooperative), and where Russia and the international system. The future, is either “strong” (economic growth) or however, is uncertain, and it is often said “weak” (economic decline). The analysis also that this is particularly true in the case of discusses potential sources of surprise and Russia. In the 20th century, Russia (or the disruption, that will impact Russia’s Soviet Union) experienced two occurrences development and relations to the outside of regime change and state collapse: the fall world. The concluding section summarizes of the Russian Empire in 1917–18, and the the results and details the implications of collapse of the Soviet system in 1989–91. In different outcomes. the past 20 years, post-Soviet Russia has abandoned its previous pro-democratic At least one important topic will not be course and regressed to authoritarianism covered in this analysis: global warming. and a more assertive foreign policy Russia is one of the countries in the world reminiscent of the previous century. These most vulnerable to climate change. Large dramatic changes were difficult to areas in the arctic and of its infrastructure anticipate, and as a result the Western are built on permafrost. The Russian policy community was caught by surprise. authorities have identified various effects of

rising temperatures. The most alarming are A challenge for any analysis is that the most threats to public health, endangered “unlikely” scenario will often be the most permafrost, and increased likelihood of pertinent for the policymaking community, infection and natural disasters such as and this report therefore avoids any drought, floods and wildfires. Other effects reference to a “baseline” scenario. Decision include shrinking extents of summer ice, makers and analysts, however, tend to have which will foster increased access to and a bias towards scenarios with few radical navigation of the Arctic Ocean. How the surprises. This bias can be relatively strong. Russian government will seek to manage the In the early 1980s, few observers risks posed by global warming remains to be anticipated the collapse of the Soviet Union, seen. even though in retrospect many consider the outcome inevitable (although this may Although this report discusses different of course not be true). Before the scenarios, it does not attempt to assign annexation of Crimea and the war with quantitative probabilities to any specific Ukraine in 2014, there was little policy outcome due to the methodological discussion outside the circles of security and complexity and uncertainty inherent in any foreign policy experts about a potential such operation. Elements of scenarios can Russian threat, even though the country’s also appear in combinations. For example, a armed forces had occupied about 20 per regime can combine dictatorship with liberal cent of Georgian territory in 2008. In both economic policies and adherence to instances, the prevailing baseline scenarios international law. Alternatively, a regime turned out to be insufficient. can combine an open liberal political system

with isolationist economic policies and an

inward orientation with limited interest in Authoritarian model preserved foreign affairs. Whatever our personal Whether Putin will attempt to remain in wishes regarding outcomes for Russia, the power post-2024, and how this transition outside world will need to manage whatever would be managed politically, remains an may appear. Under any conditions, the open question. One scenario is that Putin country’s future is in the hands of its leaders will continue to rule, either directly or and people. indirectly, and that the authoritarian model he has created is institutionalized by an The Political System eventual successor. Several constitutional changes to preserve the current political

equilibrium can be imagined: the formation Russia’s historical tradition of political of a union between Russia and Belarus with centralization has been reinforced in the Putin as its leader, which has been discussed past 20 years, as President Vladimir Putin for 20 years; Putin being appointed head of has removed the independent governors of the State Council with significantly Russian regions, nationalized or assumed expanded authority; or a transformation of indirect control over large businesses, and Russia’s semi-presidential republic into a filled key positions in the country’s political pure parliamentary republic with Putin as hierarchy with his network from St prime minister.1 On 15 January 2020, Putin Petersburg and the security services announced his intention to change the (KGB/FSB). As a result, strategic decision constitution, possibly creating a new making in the Russian system is constitutional document. It remains to be concentrated at the pinnacle of the system seen what the outcome will be, and to what of power. extent the process will comply with the

existing provisions of the Russian This section discusses three potential constitution. scenarios for Russia’s political development:

(a) “authoritarian model preserved”; (b) An alternative to a de jure alteration of the “restoration of the constitutional order”; constitution is the informal model recently and (c) “regime disruption”. The first implemented in Kazakhstan. On 19 March scenario assumes that Putin remains in 2019, President Nursultan Nazarbayev power, in one manner or another, and that announced his resignation from the the authoritarian model he has created is presidency. He will, however, retain his also preserved by his successor. The second status as national leader, his chairmanship scenario, in contrast, entails a long-term of the ruling party and his lifetime tenure as restoration of Russia’s constitutional order head of the Security Council, through which and norms after the departure of Putin. The he will enjoy certain powers that are above third scenario discusses “black swan” events those of the president. Similarly, the Russian such as political turmoil, instability and presidency could be transferred to a loyal regime change. successor, while Putin secures the position as Secretary of the Security Council with significant (informal) decision-making

1 Notably, an alteration of the division of power is president the authority to appoint members of the possible even within the framework of the current Federation Council in 2014. In Azerbaijan and Belarus, constitution as the relevant provisions are contained term limits were removed by referendum in 2009 and in chapters four to seven of the Russian Constitution. 2004, respectively. This suggests that comparable These chapters have already been amended several changes could be introduced in Russia without times, e.g. by extending the terms of the president significant resistance. and the State Duma in 2008 and by giving the

authority. Nazarbayev, who is 79 years old, Restoration of the constitutional order has ruled his country since 1991. Putin, who The second scenario is that Putin will step is 67 years old, has been in power since down in accordance with the letter and 1999. Within the framework of a spirit of the constitution in 2024, or Nazarbayev scenario, Putin could alternatively retire at some other point in hypothetically remain in power for 10–20 time as stipulated by the constitution. This is years or more. For example, with the life a prerequisite for a stepwise restoration of expectancy of Leonid Brezhnev, Putin could the political system established in the early rule until 2026, of Joseph Stalin until 2031, 1990s, with (relatively) contested elections, of Raùl Castro until 2034, and of Robert political pluralism and a separation of Mugabe until 2045. powers. A restoration of the constitutional order would also create opportunities for Putin has not shown any inclination to economic reforms and rapprochement create a hereditary political system, or to between the West and Russia, as domestic staff key positions with family members.2 A dynamics are more likely to influence key group consists of people with a foreign policy than vice versa. background in the security services. The current Secretary of the Security Council, Notably, an orderly restoration of Russia’s Nikolai Patrushev, is the former head of the constitutional order entails the identification FSB (a position held by Putin in 1998–99). of a loyal successor to Putin and will be The director of one of the largest state dependent on Putin’s personal perception of corporations, Rosneft, is Igor Sechin, a security – for himself, his family and his former KGB officer. Over half of the court entourage. Throughout his political members of the Security Council, the key career, Putin’s decision making has been strategic decision-making body in Russia, risk-averse and legalistic. This suggests that hold military or security services ranks.3 a conservative policy towards constitutional Purges and replacements can further amendments will be preferred if possible. consolidate their position and incentivize This also means that the potential for a elites to distance themselves from factional restoration of the constitutional order is tendencies. Nonetheless, recent purges relatively strong, should adequate seem unrelated to actual opposition to the opportunities emerge. A loyal successor to Kremlin. Rather, they appear to be the result Putin would mean that the core of the of elite rivalries, for example, between political system he has created will remain statists and reform liberals, or of very strong intact for a transition period, after which political signalling from the Kremlin to the reforms can be implemented by a new elites.4 In a situation where the generation of political decision makers. authoritarian model is preserved, and the level of political repression is increased, the A successful constitutional restoration in role of the security services will remain Russia would eventually contradict the pivotal. current political equilibrium. A new political equilibrium would reverse several legacies of the Putin years and confront structural

2 In fact, Putin has never confirmed the identity of his 4 Recent purges include former Economic Minister, own children. Alexey Ulyukayev, who was sentenced to several years 3 Another important group consists of Putin’s close in prison in 2017; regional political leader Nikita friends and business partners from Saint Petersburg, Belykh, who in 2018 was sentenced to eight years in for example Gennady Timchenko and the Rotenberg prison; and former Minister for Open Government brothers. Affairs, Mikhail Abyzov, who was accused of economic crime in 2019 and is currently awaiting trial.

Soviet and post-Soviet legacies such as the For Putin, preventing a repeat of the Soviet heavy political and fiscal centralization of state collapse has been a political priority. power. Constitutional reforms could make According to official Russian security the democratic system more robust and less doctrines, colour revolutions – allegedly vulnerable to future manipulation. Such supported by Western states – constitute a reforms would clarify the relationship threat to Russian regime stability. The idea between Russian law vis-à-vis international that Western states have hostile intentions law and strengthen the judicial towards Russia also appears to be Putin’s independence of the Constitutional Court. personal conviction. Should large-scale anti- Two post-Soviet states, Armenia and Kremlin protests therefore appear, a Kyrgyzstan, have for example implemented repressive state reaction is not in doubt – strict limitations on term limits for the the question is how severe the reaction president – in contrast to the current would be. The relatively small-scale protests Russian model which technically “allows” for in Moscow in 2019, in which 5,000–20,000 the perpetual rotation of an incumbent people participated in the summer months, between the presidency and the position as were followed by 3,000 arrests and dozens head of government.5 of high-profile jail sentences for protest participants. Regime disruption Russia lacks a historical tradition of With a growing economy, a non-democratic predictable handover of power, a legacy of state can contain dissent using co-optation; the Russian Revolution in 1917. The Soviet that is, a redistribution of wealth and the leaders Vladimir Lenin (in office 1917-24), buying of court loyalty. This is particularly Joseph Stalin (ca 1928-53), Leonid Brezhnev visible in relation to election cycles. If co- (1964-82), Yuri Andropov (1982-84) and optation is not feasible, there are also Konstantin Chernenko (1984-85) died in censorship (which thus far has been limited office and were never seriously threatened but is increasing), propaganda and by court rivalries or opposition. The two repression. Regime control of mass media, exceptions are Nikita Khrushchev (1953-64), such as the main television stations, has who was overthrown in a palace coup in created favourable conditions for the 1964, and Mikhail Gorbachev (1985-91), Kremlin to frame public discourse and to who initiated reforms which resulted in the marginalize potential dissent. Control also break-up of the Soviet Union. Boris Yeltsin provides the possibility of suppressing (1991-2000) used force to subdue a negative news. Over time, however, this confrontational parliament in 1993, and control may be less efficient for two eventually handed power to his prime reasons. First, because the gap between minister, Putin, who was elected president people’s experienced reality and the in 2000 and re-elected in 2004, 2012 and messaging on television about this reality 2018. The Russian presidential election in grows too large. Second, social media as an 2024 will therefore be important for the alternative source of information is country’s future development path. If Putin becoming more prevalent and diversifying remains in power after 2024, the operating the news consumption of Russian citizens. assumption is that his tenure will resemble Recent legislative changes to strengthen the that of previous long-term Soviet leaders. authorities’ capacity to monitor and restrict online access and cellular networks should be seen from this perspective.

5 Strict limitations on term limits for the president making it highly likely that such a change will also be were indeed suggested by Putin in January 2020, implemented.

Opinion polls need to be treated with the GDP was anticipated to grow at an average requisite degree of care but suggest that a annual rate of 6.5 per cent between 2012 majority of the Russian population has a and 2020. GDP growth between 2012 and pessimistic or neutral view of the future. 2019, however, was 0.5 per cent – According to a 2019 Russian opinion poll, 62 significantly below official estimates. per cent of the Russian population finds it Household incomes, which were anticipated difficult to plan adequately for the future, an to grow at a similar rate to GDP, declined by increase from 58 per cent in 2018. Only 18 about 5 per cent per year over the same per cent assert that life will be calmer in 20 period. years from now, whereas 20 per cent predict that life will be less calm, 32 per cent The overriding economic policy goal of the predict no change and 29 per cent did not Russian government has been to maintain know how to reply to the question. growth levels above the world average. Similarly, only 21 per cent believe that that Weak or below world average economic socio-economic security will improve in the development will eventually affect the next 20 years, whereas 25 per cent predict a political equilibrium, as it will force the deterioration, 31 per cent predict no Russian government to prioritize more improvement and 23 per cent could not sharply among its spending promises. The answer the question. If Putin’s “social fundamental problem is structural: the contract” with the citizens of Russia – the country has comparatively poor rule of law, idea that the people stay out of politics in weak protection of investors’ rights and high exchange for stability, socio-economic levels of corruption. The crux of the matter ameliorations and/or great power glory – is that for long-term growth to occur, begins to crumble, then conflicts could comprehensive reforms need to be inflate to an extent that threatens local, implemented. Such reforms, however, regional or even national stability. A threaten the current political equilibrium. disruptive regime change, however, could also arise because of court rivalries rather In this section, three scenarios are than a popular uprising or protest considered: (a) “no reforms, no change”; (b) movements. “economic reform”; and (c) “economic disruption”. The first scenario assumes that Economic Development no economic reforms are implemented and considers different growth trajectories. The

second scenario outlines political reforms After experiencing positive economic and the third scenario discusses potentially growth in the early 2000s, Russia has disruptive events such as a decline in the become a middle-income market economy. demand for oil and natural gas, and the To what extent the country will maintain emergence of disruptive technologies such positive, long-term economic growth, as quantum computing and artificial however, remains an open question. The intelligence. foundation of Putin’s popularity was the decade of strong economic growth between 1999 and 2008. In the past decade, No reforms, no change following the 2009 financial crisis, the war In this scenario, the statist economic model against Ukraine, sanctions and the decline in established by Putin remains intact and the price of oil, Russian growth figures have preservation of the political equilibrium is a trailed below the global average. According key priority. The Russian economy benefits to predictions in 2008 by the Russian from the market reforms implemented in Ministry of Economic Development, real the 1990s and early 2000s, while the state

suppresses dissent and controls its strategic the 2018 increase in the retirement age and heights: energy, finance and the defence the VAT rate more likely. industry, three important sources of rent distribution and elite enrichment. Figure 1 plots real GDP (in 2018 US dollars) Institutional reforms are unlikely to feature for China, the European Union, Russia and in this political equilibrium. Rule of law and the USA, and presents two different growth anti-corruption measures, as noted by scenarios for the period 2019–2045. In one several economists, constrain the elite’s scenario, the countries experience 1 per ability to extract rents from the economy cent per annum growth, and in the other and thus to hold on to power. Although annual growth of 4 per cent. During the reforms could result in stronger GDP growth “good” years (1999–2008), Russia’s average and economic prosperity, they reduce the growth was above 4 per cent; in the “bad” court elite’s ability to enjoy this prosperity. years (2019–2018) it was below 1 per cent. In all the growth scenarios considered here The most optimistic scenario for future – even in the unlikely event that Russia growth was published by the Russian outgrows the richest countries by a factor of Ministry of Finance, which in 2019 predicted 4 in the next 25 years – Russia’s economy as its baseline scenario GDP growth of 3.0 will remain significantly smaller than the per cent for 2020–2036. The International economies of the EU, the USA or China. Monetary Fund (IMF), by contrast, predicts Russian GDP as a share of world GDP will an annual growth rate of 1.7 per cent for inevitably decline, although this is also the 2019–2024, a full percentage point lower case for the EU and the USA, and only China than the Russian estimate. Lower economic is expected to continuously increase its growth makes unpopular reforms similar to share of world GDP in the coming years.6

Figure 1. GDP of EU, US, Russia and China 1980-2045: 1 % and 4 % growth projections (2018 US dollar, billion) 80 000 EU China 70 000

60 000 Russia USA

50 000

40 000

30 000

20 000

10 000

0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045

6 For simplicity, it is assumed that the United Kingdom “Brexit”, the UK will remain a key contributor to remains in the EU and that no other changes occur in European security and economic development. the chosen period. Even after the completion of

Figure 2. GDP per capita of USA, EU, China and Russia, 1980-2045: 1 % and 4 % growth projections (2018 US dollars) 200 000

180 000 USA EU

160 000 Russia China 140 000

120 000

100 000

80 000

60 000

40 000

20 000

0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045

Economies differ not only in their total significantly outgrows the EU in the next 25 volume of national resources (typically years. Depending on the chosen growth measured by GDP), but also in the quality of estimates, China could surpass Russia in such resources (typically measured as GDP terms of GDP per capita in the next 25 years per capita), and both measures are relevant (in nominal terms, China has already caught when discussing economic development. A up). country with a vast but impoverished population and territory, for example, will Figure 3 shows UN estimates of population matter little in comparison with the growth for Russia, China and the USA until combined economic capacities of the richest 2100, and considers three different countries. States with a high average GDP projections: low, medium and high fertility. per capita, on the other hand, have the In a situation where all countries experience capacity to mobilize resources out of medium fertility, the population of China proportion to their general economic would peak in the next decade and then capacities. decline, whereas it will stabilize at a somewhat lower level in Russia and increase Figure 2 plots average GDP per capita in the USA. A demographic decline in the growth (in constant 2018 US dollars) for coming decades, all else remaining equal, China, the EU, Russia and the USA, and increases average GDP per capita. presents two different growth scenarios for Historically, higher household incomes and a 2019 to 2045. In one scenario, the countries growing middle class have increased experience 1 per cent annual growth in GDP demand for accountability and democratic per capita, while in the other annual growth institutions. This may be particularly is 4 per cent. In terms of GDP per capita, the important in a country like Russia, where EU and the USA will remain richer than both the working-age population is set to decline China and Russia in 2045, unless Russia as a share of the total population, and the

political leadership will need to make age, entitlements and fiscal spending unpopular policy choices regarding pension priorities.

Figure 3. Population Growth, 1950-2100 (low, medium, high fertility) 1 800

1 600 China Russia USA 1 400

1 200

1 000

800 Million people 600

400

200

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100

Global aggregate demand will remain crucial interest, and Russian infrastructure for to Russia’s long-term economic energy export is an important instrument to development. A negative external achieve this goal. environment, with heightened trade and geopolitical risks leading to a slowdown in Economic reform global average growth, is a threat to the The Russian government has combined a Russian economic model and its reliance on prudent macroeconomic policy – fiscal exports of oil and natural gas. Therefore, the reserves, stability and low government debt construction of pipelines – Turkstream (to – with an ideology that favours state control Turkey), Power of Siberia (to China) and and rent distribution. Although Russia was Nord Stream II (to Germany) – is important able to cope with the financial crisis in 2009, to strengthen Russia’s position as an energy and the double impact of sanctions and a superpower. Even if the price of energy lower oil price in 2014, the model has declines, Russia will have captured its proved insufficient to generate stable market share while also blocking economic growth. Fundamental reforms competition such as from US liquefied could stimulate investment and aggregate natural gas (LNG) for the next 20 years, after demand but would require a change in the which demand for fossil fuels is expected to current political equilibrium, not least to decline. Securing a favourable external fight corruption and strengthen the rule of environment is therefore a key Russian law. Russian reform liberals and

international organizations such as the several of these fields. In the absence of any International Monetary Fund (IMF) and the such changes, however, the technological World Bank have produced several plans gap with the most advanced economies will and suggestions for a future reform agenda, grow wider over time. Quantum computing and their ideas are therefore not repeated will leave Russian cyber infrastructure and here. defence systems vulnerable and will incentivize Russian leaders to cooperate Certain reforms may be implemented more closely with one or several other more without any alteration to the political advanced states. This issue will be equilibrium, and the Russian government’s particularly pronounced in a situation with a current strategy has been to use regionalization or fragmentation between investments in infrastructure and national different industry standards, such as projects to stimulate economic growth. competing Western or Chinese Another factor is the dominant role of the technologies. US dollar in Russia’s financial system has been described by Russian officials as a Alternative (non-fossil-fuel) energy sources, security risk, as it exposes Russia’s such as wind and solar power, in vulnerability to large-scale economic combination with a sustained shift to sanctions by Western states. Russia will electric vehicles constitute serious long-term attempt to reduce its dollar dependence, risks for the Russian economy. In the next and increase its reserve holdings of for two decades, electric vehicles could claim a example euros, renminbi and gold.7 Under dominant share of the market for transport any conditions barring Soviet-style autarchy, vehicles. Increasing competition in the which would entail trade embargoes, capital international energy market, in combination controls and a non-convertible currency, with a global decline in demand for fossil Russia will remain integrated into the fuels, is expected to put downward pressure international financial system. Russian on the price of oil and natural gas. This trend economic policy will also need to manage can only be partially offset by an increase in government debt. Although current debt demand for nuclear energy, an area where levels are low in absolute terms, the costs of Russia’s state corporation Rosatom is a servicing the debt have increased as a share global market leader. A decline in energy of federal expenditure in recent years. revenues would require an increase in taxation, something that could strengthen Economic disruption domestic pressures for political Although Russia has certain strong accountability. An economic policy that innovative capacities in the defence attempts to offset a decline in fiscal industry, the country is lagging behind in the revenues with an increase in government development of anticipated sources of debt and/or monetary expansion, however, disruptive change, such as machine learning would exacerbate the risks that a financial and automation, genetic engineering, crisis and/or a default will occur. quantum computing and alternative energy sources. This does not preclude the Foreign and Security Policy possibility that Russia, with its well- educated population and scientific tradition, Russian foreign policy takes as given that the will be able to make advances in one or world is becoming increasingly multipolar,

7 Cryptocurrencies are an alternative to conventional will be accepted by the Russian Central Bank, remain currencies, although what role they will play to be seen. internationally, and whether or to what extent they

and that in particular Asia and emerging systems and nuclear energy, but also regional constellations will rival the military cooperation, financial and hard economically most developed Western security support. These international powers. Although Russia’s relative share of relations underpin a long-term strategic world GDP is expected to decline in the objective of Russia, which is to be coming decades, Russia will remain one of recognized as one of the world’s great the main international actors due to the powers. Russia also envisages a larger role in country’s size, its permanent seat on the UN the Arctic, which is seen as a strategic area Security Council and its possession of in terms of security, transport and energy. modernized nuclear weapons. Its agile use Its Arctic strategy for 2035 covers several of military power (as in Ukraine and Syria), priorities, from the development of ports in combination with the use of “hybrid” and hubs to the building of nuclear tactics – cyberattacks, disinformation and icebreakers, the mapping of natural co-optation of political forces abroad – resources and the launch of new satellites. would reinforce the presence and Russian security doctrines since the 1990s importance of Russia in world affairs in the have considered NATO eastward expansion medium term. a military threat. Other threats, as identified in Russian official doctrines and speeches by Geography and perceptions of history will political and military leaders, are US missile continue to shape the conduct of Russian defense, regional and local wars on Russia’s foreign policy. One priority has been the borders, international terrorism and reintegration of the former Soviet space, radicalism, and “hybrid” threats (alleged most notably former Soviet republics that Western-led colour revolutions and regime are landlocked and have no access to the changes). To a large extent, there are strong sea: in Europe (Belarus), in the Caucasus historical continuities in Russian/Soviet (Armenia) and in Central Asia (Kazakhstan, threat perceptions, and significant Tajikistan and Kyrgyzstan). States with sea deviations are therefore unlikely in the access, on the other hand, have distanced future. What may change, primarily, is the themselves from Russia (the Baltic states) main driver of Russian foreign and security and/or been the target of military invasions policy: the broader zero-sum worldview of (Georgia and Ukraine). With the loss of the Russian leadership and the belief in a Ukraine from its sphere of influence, “privileged sphere of interest”. A change in previous Kremlin visions of integrating this worldview could arise because of “historically Russian” territories have been internal factors (e.g. democratization) severely constrained for the foreseeable and/or external factors (successful future. A completion of Ukraine’s EU cooperation). This section considers three integration would have transformative different scenarios: “conflict”, “cooperation” political consequences for Russia. and “disruption”.

Another priority has been cooperation with Conflict countries elsewhere in the world: the Russian territory covers a larger landmass Middle East, in Turkey and Saudi Arabia; than any other country in the world, with a Asia, primarily China; North Africa, in Egypt surface of more than 17 million square and Libya; and far-away allies such as kilometres and a border of over 20,000 Venezuela. Russian foreign policy on these kilometres with 16 other states. The countries has been pragmatic and combination of an authoritarian political transactional, involving elements such as the system and many neighbours, as in the case export of oil and natural gas, weapon of present-day Russia, increases the risk for

bilateral conflicts over territory. Between Georgia, 2008; Ukraine, since 2014; and 1870 and 2001, Russia/the Soviet Union Syria since 2015). Russian armed forces have initiated 219 border conflicts that included a been deployed to various conflicts in 36 of show or the use of force – more than any the past 42 years. This suggests that a other country. In second place is the USA, readiness to apply hard power to resolve with 161 conflicts; followed by China (151), Russian security interests exists regardless the UK (119), Iran (112) and Germany (112). of political regime (communist, democratic Large countries, in other words, are more or authoritarian). likely to initiate border conflicts, and authoritarian countries are more Military expenditure predisposed to military confrontation than Figures 4 and 5 consider nine different democracies.8 scenarios for Russian military expenditure in 2045, based on different assumptions about There is no evidence that the Russian annual GDP growth (1%, 2% or 4%) and population has an appetite for military different assumptions about the defence conflicts. According to a Russian poll expenditure’s share of GDP (2%, 4% or 7 %). conducted on 8 March 2014, only 15 per On average, Russia has spent about 4 per cent of Russians endorsed military cent of GDP on its military for the past 20 intervention in Ukraine, while 73 per cent years. A realistic scenario is therefore the were opposed – even though the poll was middle column representing 2 per cent conducted after four months of anti- annual growth and military expenditure at 4 Ukrainian propaganda on Russian state per cent of GDP, which provides total television. The Russian leadership, however, spending on defence until 2045 of about is not necessarily restrained in its foreign US$ 112 billion in nominal terms, or US$ 289 policy conduct by public opinion. billion adjusted for purchasing power (both Historically, the decision to use military expressed in constant 2018 US dollars). force has been taken within a small group of Weak long-term economic development, as decision makers, in a non-transparent and in the past decade, will be a restraining unaccountable manner (e.g. the factor on Russian military capacity – in interventions in Afghanistan, 1979–89; absolute terms and compared with other Chechnya, 1994–96 and 1999–2009; large states.

8 See the Correlates of War dataset on Militarized Interstate Disputes, https://correlatesofwar.org/data- sets/MIDs.

Figure 4. Scenarios for Russian Defence Expenditures in 2045 Value of Russian defence expenditures in 2045 based on assumptions of 1 %, 2 % or 4 % yearly GDP growth, where defence expenditures are either 2 %, 4 % or 7 % of GDP (non-adjusted for PPP) 350 325,1 1 % growth 2 % growth 4 % growth 300

250

196,2 200 185,8 151,9 150 112,1 92,9 100 86,8 56,1 43,4 50 Billions of US dollars, 2018 dollarsUS

0 2 % of GDP 4 % of GDP 7 % of GDP

Figure 5. Scenarios for Russian Defence Expenditures in 2045 Value of Russian defence expenditures in 2045 based on assumptions of 1 %, 2 % or 4 % yearly GDP growth, where defence expenditures are either 2 %, 4 % or 7 % of GDP (adjusted for PPP). 900 839,1 1 % growth 2 % growth 4 % growth 800

700

600 506,5 479,5 500 392,0 400 289,4 300 239,7 224,0 200 144,7 112,0 Billion US dollars,BillionUS dollars2018 US 100

0 2 % of GDP 4 % of GDP 7 % of GDP

Grey zone tactics countries of greatest importance will be So-called hybrid or grey zone tactics will former Soviet republics such as Armenia, become more important in a situation of Azerbaijan, Belarus, Georgia and Ukraine, long-term economic decline, as they provide where there is a shared history and an opportunity to influence outside events language, but also because these nations in a way that is low cost and low risk. The provide a buffer against potential outside

threats. Russia will regard an expansion of scenario that limits Russia’s hard power NATO or a successful EU integration into this projection, relieving the concerns of its region as a national security threat. Other neighbours and beyond, while reassuring regions, such as the Baltic states, the Russian leaders that a mutual adherence to Balkans and Central and Western Europe, international law, conventions and other are less vulnerable to interference but also agreements brings benefits in terms of less significant in terms of Russia’s security security, economic development and interests. Given the low cost of certain grey stability. Although the chances of zone tactics, such as cyber operations, cooperation under current political disinformation and the co-optation of conditions appear limited, it is plausible that political influence, however, they may be future Russian leaders might consider that applied opportunistically even when the the level of acceptable confrontation with probability of success is low. The Western the major global powers has been exceeded. priority should be deterrence of high-risk That conditions conducive to cooperation grey zone tactics, such as small proxy wars, might arise is therefore a reasonable espionage and assassinations abroad, and to scenario for the next 10–20 years, possibly develop responses in domains where Russia following a domestic transition of power in is vulnerable. Russia.

Private military companies (PMCs), such as In the medium term, Russian de-escalation the Wagner corporation, are currently entails a withdrawal from the Donbass, a legally prohibited in Russia but are (tacitly) cessation of grey zone tactics abroad, a allowed to operate outside the country’s reduction in demonstrative military borders. Russia’s use of proxies has been exercises, and a shutdown of hostile risk-averse and non-committal, and proxies propaganda and the fuelling of revanchist provide plausible deniability. Two different sentiments in Russia. This, however, is tactics can be observed. On the one hand, unlikely under the current political the use of proxy groups against a specific equilibrium. Western intermediary steps target, as in the case of the so-called towards cooperation would involve a return people’s republics of Donetsk and Luhansk to negotiations on arms control and (DNR/LNR) versus Ukraine. On the other confidence-building measures, but also hand, the use of proxy groups on both sides deeper engagement with Russian society in of a conflict, as in the case of Libya where areas such as education, science, Russia is participating on the side of Field technology, the environment and human Marshal Khalifa Haftar (through Wagner) rights. Furthermore, Western states could while simultaneously balancing its relations exhibit a stronger sensitivity to Russian with Tripoli (through the Chechen President, signalling, for example on US missile Ramzan Kadyrov). Both tactics serve Russian defense; engage in positive signalling, for security interests and can be adjusted to the example, with official visits to World War II local context. cemeteries; avoid negative signalling (Western “high horses”); and engage in Cooperation dialogue on common security interests, A “European” Russia, cooperating with the even when the chances of success are low. EU and multilateral organizations, such as the Organisation for Economic Co-operation An important foreign policy question for the and Development, would provide a next 10–20 years is whether conflict significant European security dividend. The resolution will be limited to several “small key element in improved cooperation is a bargains” or one “grand bargain”, involving

the entire post-Soviet space. A small bargain the scope of this study. Regardless of would be limited in scope and involve domain or theatre, the key challenge will be ongoing diplomatic negotiations such as the to manage potential surprise. Russian use of Normandy Format (on eastern Ukraine). A deception and disinformation is sometimes grand bargain would cover all the occupied considered a challenge, as it obstructs the territories, of Abkhazia, Crimea, eastern ability of outside observers to predict the Ukraine, Nagorno-Karabakh, South Ossetia conduct of Russian foreign policy. and Transnistria. The diplomatic challenge Unpredictability is premised on a party’s with the latter will be twofold: the legal ability to avoid observable patterns, and this status of the occupied territories and the element is pronounced in a country with future security architecture of the region. centralized and non-transparent decision Irreconcilable claims, such as Russian making. To minimize the element of insistence on a “privileged sphere of surprise, or disruption, is therefore an interest” that denies the sovereignty of important task, and certain pattern Russia’s neighbours, makes a grand bargain recognition is, within bounds, possible. unsustainable and possibly Russian society is sometimes more counterproductive (destabilization). transparent than is typically assumed, and some open source indicators, which need to The multilateral dimension of the be analysed in combination and should be relationship between Western states and treated with requisite care, are: Russia will become more pronounced. In recent years, Russia has increased its • unannounced military exercises and military and economic cooperation with drills near Russian borders; China, and China is using its investments, • non-planned changes in spending on technological advantages and diplomatic defence and security, or an increase resources to enhance its political influence in budget secrecy; in the post-Soviet region. This process is • new targets of propaganda and visible in areas that have security disinformation campaigns; implications, such as the defence industry, • the appearance of proxy groups and surveillance technology and competition front organizations requesting between rival elite groups and organized Russian support; crime syndicates. Russian policy choices in • abrupt and negative changes in the next 10–20 years will determine how Russian diplomacy towards a target and to what extent Russia will become more country; dependent on China. Furthermore, Chinese • the imposition of sanctions and competition with the EU/US in the Eastern embargos; Partnership countries and Central Asia will • cyberattacks and the release of hinder democratization and market reforms “leaks”, such as emails, intercepted – a vital security interest of the EU. phone calls and/or “sensitive” Managing the relationship with non-EU information on decision makers and European states such as Georgia and other key actors; Ukraine will therefore be as important for • public statements on impending the EU as the relationship with Russia. regime change and/or large-scale protest activity in a country in Disruption Russia’s “sphere of interest”. Manifold potential sources of disruption can • Russian rhetoric on the need to be imagined, and an exhaustive “laundry “protect” certain minorities in list” of potential risks is therefore beyond neighbouring countries.

• Domestic instability in Russia’s In the long term almost all the factors neighbouring countries, and Russian considered in this report are subject to claims to provide stability in the change and fundamental uncertainty, and post-Soviet space and beyond. scenarios can also appear in different combinations. Nonetheless, it will be Concluding Remarks and important to consider certain long-term trends. Implications 1. The relative gap between Russia and This report has considered different the largest economies (the EU, the scenarios for Russia to 2045 in three related USA and China) will increase in areas: the political system, economic terms of economic and military development, and foreign and security capacity. Russia’s position in an policy. The analysis has covered conditions emerging multipolar world order where Russia is either “bad” (authoritarian, will therefore decline and may belligerent) or “good” (democratic, create a crisis of ambition and cooperative), and where Russia is either identity. Countervailing factors are “strong” (economic growth) or “weak” Russia’s size and natural resources, (economic decline). The report has also its permanent position on the UN discussed potential sources of surprise and Security Council and its possession disruption that will affect Russia’s of nuclear weapons, which make it a development and its relations with the non-negligible participant in the outside world. international system.

A risk-minimizing strategy would be to 2. Technological advances in machine assume that nothing in Russia will ever learning and automation, genetic change, not because it is necessarily true so engineering, quantum computing much as it is a strategy that provides the and alternative energy threaten greatest elasticity possible in our collective Russia’s economic model and response. In the medium term, confirmation security. A decline in aggregate regarding the post-2024 situation, and demand for fossil fuels will need to whether Putin will remain in power, will be offset by new sources of determine whether the political system he economic growth, but these sources has created is also consolidated. The remain to be developed. An political equilibrium will also determine the increased reliance on Chinese space for economic reforms and how Russia technological standards and manages its foreign relations. New conflicts investments, rather than Western in the international arena cannot be ruled alternatives, will have implications out, and it will be important to distinguish for Russia’s foreign policy between threats that need to be deterred orientation and possible and those that can be managed by other dependencies. A long-term strategy means. A policy of deterrence needs to be of the EU will need to consider the combined with confidence-building integration of Russia into the measures, including but not limited to arms European sphere, while balancing control, support for environmental, religious EU-China relations. and human rights organizations, economic cooperation, education and science 3. The EU-Russia relationship will be cooperation, and people-to-people contacts. multilateral and contingent on the

countries’ shared neighbourhood (primarily the Eastern Partnership countries). A successful EU integration of countries such as Ukraine has implications for Russia, but several obstacles remain. The main obstacle will be conflict resolution, and the occupied territories of Abkhazia, Crimea, eastern Ukraine, Nagorno-Karabakh, South Ossetia and Transnistria. Russian insistence on a “privileged sphere of interest”, which denies the sovereignty of Russia’s neighbours, makes a resolution unsustainable and the pursuit of one possibly counterproductive (destabilization).

4. Historically, Russian political development has moved in cycles, and changes in the direction of these cycles have occurred unpredictably. Such a development would be difficult to influence from the outside, although tensions and the actions of other states could either accelerate or mitigate the eventual outcome. Democratization is not a prerequisite for rapprochement with the West, and de-escalation would be possible if there were diverse groups in Russia that supported such a policy. Cooperation and de-escalation would reduce the Russian defence burden and provide an opportunity for a normalization of relations between Russia and the Western bloc.

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