1 Russia s Greatest Challenge for the Next Decade is... During the month of February, Wikistrat, the world s first crowdsourced consultancy, held a collaborative brainstorming exercise to predict the greatest challenges that Russia and its leaders will have to face in the following decade. More than 40 analysts from Wikistrat s global community of experts participated in the exercise; this report is a summary of the brainstorming drill and the crowdsourced analysis produced therein. INTRODUCTION In February, both the Sochi Olympics and the unfolding events in Ukraine drew international focus to Russia. Both events demonstrated Vladimir Putin s eagerness to promote and restore the perception of Russia as a global superpower. In 2013, Putin seemed to be on a roll after sidelining the domestic opposition and successfully tightening his grip on the Russian political and business elite. Most importantly, he seemed to restore Russia s clout as a geopolitical power by capitalizing on the foreign policy mishaps and weaknesses of its global rivals. But since then, the challenges that Russia and its leaders will face in the next decade have become increasingly visible. Wikistrat s analysts have identified many of these challenges and threats, including: Risks associated with Russian power projection abroad Systemic problems in the Russian economy Transfer of power after Vladimir Putin s term ends Russia s pressing demographic problems Dual trends of both increasing nationalism and persistent separatism 1. Russia must adjust its superpower pipe dreams to diplomatic realities. Russia s heavy-handed approach on Ukraine demonstrates an increasingly confident and aggressive foreign policy. This has been encouraged by the perceived political weakness of the EU, a looming U.S. disengagement in the region and an inconsistent stance from China. A decelerating Russian economy also renders imperial politics a necessity. In 2013, Vladimir Putin claimed several important diplomatic victories in the Middle East, Azerbaijan and in the post- Soviet space. However, there are certain risks involved in this foreign policy approach. ABOUT US Wikistrat is the world s first crowdsourced consultancy. It leverages a global network of subject-matter experts via a patent-pending Collaborative Competition methodology to provide a variety of analytic services. Scenario generation, policy planning, risk assessment and red-teaming exercises are conducted by Wikistrat on a realtime, interactive online platform
2 Russia will need to handle numerous issues at the same time, due to it fashioning itself as a political counterbalance to the West as well as a re-emerging superpower. However, Russia arguably lacks the human, financial, diplomatic or military resources to manage all of these goals at once. The silent invasion of Crimea may seriously hamper the management of strategic issues, despite being a tactical gain. Russia s increasing diplomatic isolation may cost Russia the ability to balance between Europe, the U.S. and an empowered China. Despite China s recent (and arguably temporary) status as a Russian ally, China has a growing range of interests conflicting with those of Russia and has already in several instances managed to coerce the Russian government to cooperate. Russia will also be in dire need of bargaining chips on the Arctic front, as a multilateral agreement there seems unlikely. The increasing availability of trade routes will likely motivate non Arctic Council countries to become involved. If Putin s foreign policy efforts result in failure (especially as said failures relate to Russia s economy) it may rock the Russian power structure enough to lead to his fall. 2. Russia must address the systemic problems of its economy to ensure sustainable economic growth. Recent months have seen a steady stream of reports about the grim prospects of the Russian economy in the coming years. At the end of 2013, the Russian government abandoned its denial and acknowledged that economic problems were the result of internal imbalances rather than purely external factors. One of the most cited systemic problems is Russia s overdependence on the export of commodities, which also subsidizes less competitive industries. As a result, this dependence limits the Russian economy, especially if oil prices progressively erode or the global gas market becomes more competitive. Similarly, foreign investment is hampered by systemic corruption and a weak rule of law e.g., the poor protection of property rights, a weak court system (that risks being further damaged by the recent decision to abolish the Supreme Court of Arbitration), and legal miscarriages like the Magnitsky human rights case. Furthermore, the so-called single industry towns (in which over 15% of Russia s population live) are symptomatic of Russia s ailing economy. A considerable number of them are threatened by closures and cutbacks in their industries (e.g., aluminium production) while also facing chronic underinvestment. Many of Russia s economic problems can be traced to a lack of respect for formal institutions, which are usually overridden by informal networks. There is no direct connection between the wealth of the Russian elite and the overall performance of the economy. The global economic crisis resulted in the large-scale bailouts of politically connected businessmen in suffering industries while the state spent billions of dollars on projects like the Sochi Olympics, estimated to have cost 45.8 billion USD by Alexei Navalny s Anti-Corruption Foundation. There has been significant lobbying to increase the role of the government in the Russian economy, supposedly to make the rent generated by commodities export easily accessible. As a result of the disconnect between the politically connected Russian elite and the broader Russian economy, it is difficult to foster any sort of rule of law, as this would create a level playing field for outsiders. This has led to the failure of top-down modernization projects. Russia needs to urgently diversify its income, possibly through the emergence of novel industries. If this does not happen, the country faces not only a continued brain drain, but also the failure to turn Moscow into a global financial centre, growing social tensions and potential bankruptcy for some regions. 3. Russia must ensure a safe transfer of political power for the post-putin era. It is strongly debated whether Vladimir Putin s current term will be his last, but barring a change to Russia s constitution, he will have to leave the presidency by 2024. Ensuring a peaceful succession in a system built to fit the political character of one man is a major challenge, if not impossible. This is further complicated by the question of whether Putin s exit will involve a political transition of any sort. The support Putin receives from Russia s elites and his public approval seem to have both strengthened in the past year. However, his base of support is not strong; it is only a state of patience with the current president. And only a fragment of the Russian population would like to see Putin serve a fourth term.
3 Russia s elites also seem increasingly agitated. As both the 2016 Duma election draws near (presenting an opportunity for Putin to name his successor), and the amount of Russia s distributable income decreases, the political situation will become more tense. Unlike modern-day China or the former Soviet Union, Russia currently lacks an institutionalized process for true succession. This informal decision-making process will set the stage for power struggles among Russia s oligarchs. Meanwhile, Russia s political opposition is still in tatters: In 2013, despite some advances, the Kremlin successfully played on the fragmentation of the opposition movement. For a growing number of diverse and disgruntled citizens, Russia still lacks a credible and strong alternative to the present elite. 4. Russia must address worrisome demographic developments. The 2010 census (the last authoritative demographic measurement inside Russia) tallied a population of 142 million. According to the U.N., this number may be reduced to 136 or even 121 million by 2050. While the pace of Russia s depopulation is subject to debate, there seems to be a scholarly consensus on its main causes. A high mortality rate, especially among Russian males is largely the result of excessive alcohol and tobacco consumption, the former being responsible for one-fifth of male deaths nationwide. The trend is worsened by the number of abortions, which remains twice as high as it is in Europe or the U.S., despite a sharp reduction in the number of Russian abortions compared to the 1990s. Low birth rates among ethnic Russians will result in two major dilemmas: the depopulation of certain regions and a major shift in the ethnic composition of the Russian Federation. Moscow may find it difficult to retain the Eastern Siberian borderlands due to the increasing demographic pressure from ethnic Chinese immigrants. Furthermore, the Russian army has already been affected by the decreasing number of male recruits. Russia s Muslims are expected to be a steadily growing percentage of Russia s population, which may challenge the country s current existential status quo. This challenge will become increasingly visible in the long term, but must be addressed now. While programs designed to address the high rate of mortality and the low birth rate have achieved some progress, cultural changes do take a long time and no policies have yet succeeded in addressing the depopulation of Eastern Siberia. 5. Russia must avoid a standoff between nationalist and separatist movements. After the fall of the Soviet Union, a newly independent Russia failed to establish a coherent and multi-ethnic national identity. Vladimir Putin, cynically pragmatic, has turned the nationalist ethos into a tool for the ruling elite to support protectionist, anti-democratic and expansionist policies. It is also becoming a tool for the opposition to galvanize dissatisfied and alienated voters of different backgrounds into action. The silent acceptance of xenophobic nationalism continues to grow among the population, as evidenced by nationalist marches and ethnic riots. Both sides have been unable or unwilling to establish a civic face for this nationalism, thus creating a cycle of dissatisfaction at a time when Russia must embrace its ethnic diversity. This problem is exacerbated by the persistence of both separatist movements and religious extremism. The recent terrorist attacks on Volgograd and Pyatigorsk reminded Russia of the growing importance of Salafi groups which, in the future, may threaten to attack G8 meetings or global sport events organized in Russia. And the war in Syria will almost certainly result in the return of now-hardened extremists to the Caucasus. Before Russia will be able to secure the North Caucasus, it must find a comprehensive approach to the issue of nation-building.