Difficult horizons for Moscow

Difficult horizons for Moscow

Fabio Squillante
Russia and President Putin are caught between the new revelations that have emerged following the "Panama Papers" case, which has fueled the protests of the opposition, and has rekindled the confrontation between Armenians and Azerbaijanis in Karabakh. Two situations to be addressed in an economic context that is increasingly penalized by the fall in oil prices

The scandal sparked off by the publication of 11.5 million documents stolen from a Panamanian financial consulting firm, has hit President Vladimir Putin at a particularly delicate time for Russia. The so-called “Panama Papers‘ reveal the accounts of some of the people closest to him who appear to hold accounts amounting to over $2 billion. Kremlin spokesman Dmitry Peskov speaks of lies and accuses the CIA, but his wife also features in the list of Panamanian company account holders. Among the political leaders affected by the revelations is also Marine Le Pen, leader of the “National Front‘ and Putin’s main ally in France and in the European Parliament. 2 of his close friends are in fact listed as directors of a complex network of offshore companies, whose purpose is the illegal export of capital. The scandal of the Panamanian accounts has exploded at a very delicate time for Vladimir Putin. The Russian President has managed to win on the Middle Eastern chessboard, having saved Syrian President Bashar al-Assad’s regime from defeat, and then having withdrawn the majority of air forces active in country. The fact remains that Russia continues to suffer the effects of the slowdown in the global economy, the low oil prices and the western sanctions. In 2015, the crisis reduced the country’s GDP by 3.7%, causing the closure of tens of thousands of businesses, a soar in unemployment, the collapse of the ruble and the consequent rise in inflation. The Russian President’s geopolitical skills are not enough to solve these problems that cause growing discontent among the public opinion. The government of Moscow has long predicted the possible occurrence of mass disorder, and Putin is currently completing a reorganization of the security forces, with the creation of a National Guard which will consolidate the chosen departments of the Ministries of the Interior and Emergency Situations, placing them under the President’s direct authority. The reform is hotly disputed by the opposition, which is weak in the country but strong in Moscow, and which is, of course, strengthened by its own voice from the scandal caused by the publication of the Panamanian documents.


Oppositions and Karabakh: 2 fronts to be governed

In addition to these negative developments is the renewed conflict between Armenians and Azerbaijanis in Karabakh, the region of Azerbaijan which has been populated by Armenians and controlled by them for almost a quarter of a century. Thanks to proceeds from oil and the support of Turkey and the United States, Azerbaijan has, in recent years, benefited from strong economic growth, which has allowed the government, among other things, to increase its defense budget tenfold over 10 years, bringing it up to its current $4.8 billion. Since 2010, the Baku government has purchased weapons systems from Russia amounting to $4 billion, including 100 T-90 armed tanks and several anti-aircraft batteries. It has also bought drones and missile systems from Israel, while with Turkey, it has signed a military cooperation agreement. Armenia, on the other hand, is a poor country which, despite the constant tension at the border with Azerbaijan, has a defense budget of less than $450 million and is based, for $200 million, on loans guaranteed by Russia. For Moscow, the existence of the self-proclaimed Armenian Republic of Karabakh is an important factor of control and containment against Azerbaijan. This is also true considering the complex game being played over the oil and gas transport corridors. Once exclusively tied to the Soviet infrastructure, Azerbaijan now mainly exports to Turkey, via neighboring Georgia.


New geopolitical scenarios

For Moscow, therefore, the retreat of the Armenians in the Caucasus would be a great geopolitical risk and it is reasonable to believe that Moscow will do everything possible to avoid it, while formally maintaining its traditional neutrality between the 2 Caucasian republics. The Russian armed forces in Armenia maintain a major military base in Gyumri and an Air Force base in Erevan, the capital; these ensure control of the borders with Turkey and Iran and are involved in defending Armenia’s air space with 2 Mig-29 squadrons: a fighter designed for air superiority. The Collective Security Treaty Organization, whose members are Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan, obliges Moscow to intervene in the event of armed aggression in an allied country and, in November 2013, General Andrej Ruzinskij, commander of the Gyumri base, stated in an interview that if Azerbaijan tried to reconquer Karabakh, the Russian military presence in Armenia “could join in an armed conflict‘ (EurasiaNet, 01.11.13). This is unlikely, given that it could cause an expansion of the conflict in Turkey. The fact remains that Russia is already struggling with the sustenance of Crimea, the support of the separatists of eastern Ukraine, the war in Syria and the domestic economic crisis. In addition, the weight of a more robust support of its Armenian ally – even without making an armed commitment - could still prove to be unsustainable.