Economic crisis deepens in Russia as Ukraine military stand-off continues

Since the beginning of October, following a ‘request’ to intervene by the Assad government, Russian jets have been completing over 60 bombing missions a day in Syria, purportedly on ISIS positions. On 7 October, Russian navy ships in the Caspian Sea fired 32 cruise missiles again at targets in Syria. Western intelligence reported four of these fell short in Iran but both Russian and Iranian foreign ministries deny this.

For Russian domestic consumption this is presented as an attempt to form “the widest possible coalition against extremism and terrorists”. The spectre is raised by President Putin of the dangers of the return home of some 7,000 Russian citizens fighting for ISIS. Russia Today, the Kremlin’s international media outlet, however openly boasts that the intervention “has in just a couple of weeks changed the balance of forces in the Middle East… Moscow has seized the initiative not only militarily, but also on the diplomatic front… Russia has thrown down an unprecedented gauntlet to the White House, this has forced many of US’s allies to the conclusion, that Washington is losing interest in the region and is ready to accept the growing influence of Russia and Iran”.

Whilst covering the numerous cases of “collateral damage” inflicted during US and allied airstrikes, the Russian media depicts its own attacks as highly targeted, with the successful annihilation of numerous ISIS bases. ISIS is a reactionary organization that the international workers’ movement and socialists must oppose but never in the Russian media do we hear any explanation about the anger and desperation that drives people into supporting it.

Nothing indicates the Russian campaign will be any more successful than the US led campaign and lead to a decline of terrorist attacks in Russia and elsewhere. The reality is that Russia’s intervention is driven by wider objectives than simply destroying ISIS.

The Kremlin has seized the initiative from US imperialism in Syria. In 2013, Russia intervened over the western allegations of Assad’s use of chemical weapons, averting the then planned US airstrikes. The US/EU strategy, based on removing Assad and leaving the opposition forces in control, led to a sectarian nightmare, with more than ten different groups and militias [dozens of groups in 2015], mainly supported and financed by the West and reactionary Arab regimes, such as Qatar and Saudi Arabia, fighting for control.

Russia invited Assed to Moscow to discuss further plans. By supporting its long-time ally and economic partner, Russia strengthened those within the Western imperialist camp who argue that Assad should be included in negotiations, in opposition to the US and UK who want to exclude him.

The majority of Russian air-strikes are in support of Assad’s military operations, particularly around Aleppo, and to further the interests of the so-called “anti-terror coalition”, essentially an anti US-coalition across the Middle East. Inherent in this situation is the possibility of a proxy war between Russia and the West. But very unwilling itself to send significant numbers of ground troops to Syria, Russia is coordinating its air activities not just with Assad’s generals but with Iran and Lebanon’s Hezbollah – both providing a large number of ground troops. According to one Free Syrian Army commander from Aleppo: “The Russians showered us with bombs even in the civilian areas. They want to clear everything so the regime’s tanks and even foot-soldiers can advance.” These attacks benefit not just the Assad regime, but help ISIS, claims another FSA advisor: “The regime and Isis tried to take Aleppo last year and they couldn’t, and now they are trying again with the Russians. The Russians are doing Isis a huge favour. They are giving them air cover while they are attacking us from the ground.”

Iran

Top Iranian commander Soleimani began to visit Moscow in July, in part, it seems, to bolster Russian determination to oppose further encroachments of anti-Assad forces towards the Mediterranean coast, which not only undermine the Assad regime, but also threaten Russia’s naval base at Tartus. Russian representatives met the Iranians and there has been a spate of diplomatic meetings with a seemingly unlikely ally, Saudi Arabia. The two sides signed a nuclear cooperation pact and the Gulf state will invest $1billion in the Russian economy. High level meetings between President Putin and King Salman are scheduled for later this year. Saudi Arabia is concerned that ISIS expansion has to be curtailed and is uneasy at the recent US-Iranian agreement. The Saudi’s, concerned at growing Iranian influence in the region, want to proceed with intervening in Yemen.

Another very important factor underlies the apparently strengthening friendship between Russia and Saudi Arabia – oil prices, which are currently low partly due to the Saudis attempting to hamper competing US shale oil production. The Saudis invited Russia to join OPEC, seemingly with the aim of consolidating a block of oil interests capable of resisting US producers.

Russia is desperate to increase the oil price, so much so that some commentators talk of panic in the Kremlin. One former insider, Gleb Pavlovskii, compares it to "the music of a jazz group; its continuing improvisation is an attempt to survive the latest crisis." Another says the elite is in crisis: “They can’t live with Putin. And they can’t live without him.”

Russia has no clear way out of the current economic crisis. In recession since January, GDP is expected to fall by 4-5% by year end and the government expects the recession to last until the end of 2016. Unemployment statistics dramatically understate the real situation but even so the number out of work has officially increased by 13% this year. Inflation continues at high levels. For the first time in 17 years, there has been a decline in real incomes, by 10% in the large cities and reportedly by over 25% in rural areas.

Although the state-controlled media hide it, there is discontent. While the independent trade unions dispersed mass anger over health and education cuts at the end of 2014, the year still saw the highest number of protests since the start of the global crisis in 2015.Significantly most protests take place without any participation by the so-called opposition parties, such as Just Russia and the Communist Party or existing trade union structures.

Both domestic and external factors drive the Russian economy down. The energy sector accounts for 98% of all corporate profit and, despite sanctions and falling oil prices, has maintained this level because ruble devaluation has compensated losses. These profits are not reinvested in new production for fear of further reducing the oil price. Meanwhile the 700 top companies that produce 78% of Russia’s output have seen their debts escalate by two-thirds this year. The banks are reluctant to invest because they see no demand. The dramatic collapse of the Chinese stock market and currency instability make the prospects for the Russian economy gloomy. The likelihood is, according to gazeta.ru, that 2016 will be the year of “no money, no growth”. With no solution, the ruling elite are retreating to their fall-back strategy of just hanging on in the hope the crisis does not last too long.

Kremlin popularity

Kremlin popularity still benefits from the accession of the Crimea and the Syria intervention, in the words of one commentator, has been a “further dose of anaesthesia”. In the past, some sections of society in Russia prepared to ‘accept’ restrictions on democracy in exchange for improving living conditions. But now that living standards are eroded, criticism is directed at the lower levels of the ruling elite. According to the Levada research organisation, over half the population think Putin does not know the real situation in the country or that his entourage is lying to him to hide the truth. The ruling elite are clearly concerned and resorting to the whipping-up of anti-US and anti-Western moods.

Initially, the Kremlin argued that their anti-terror coalition would even extend to the US, an illusion that was dashed as airstrikes started hitting the pro-Western opposition. The Putin regime hoped that participation in the campaign against ISIS would lead to the lifting of sanctions and divert attention from the Ukraine.

Although tensions between Ukrainian government forces and the rebel Lugansk and Donetsk republics grew to dangerous levels in the summer, a new ceasefire has more or less held since early September. The Kremlin’s original strategy of creating “Novorossiya” (the expansion of the break-away republics over south and east Ukraine) was abandoned in August 2014 after Ukrainian forces made serious advances towards Donetsk. Since then, the Kremlin’s intervention has supported the rebel-controlled regions (proxy Russian territories) within Ukraine, to counter any further moves by the Kiev regime towards NATO or the EU. The costs of political and economic isolation, as well as the fear of growth of opposition at home, held the Kremlin back. A further purge of the republic’s leadership to ensure its compliance with Moscow took place in September.

Ukraine’s social and economic disaster is approaching, if not quite reaching the depths experienced after the collapse of the Soviet Union in the early nineties. The hryvnia is the world’s second worst performing currency, ahead only the Belarussian ruble. At least this was the situation before the Chinese crisis. This reflects the collapse of the Ukrainian economy, which suffered a staggering 15% fall in GDP over the past year (According to the World Bank, Ukraine’s GDP fell 35% since independence).

President Poroshenko’s support fell dramatically. Elected with 54% of the vote a year ago, polls now give him just 15%. Voters are disappointed that he did not fulfil his promises to sort out the problem of the breakaway republics within days or to give up his business interests. His proposals to increase “decentralisation” do not go far enough to satisfy the leaders of the break-away republics while, at the same time, are seen by the hawkish forces in Kiev as giving too much of a concession.

Despite the ceasefire, voices demanding more decisive action to isolate the break-away republics are still being heard. The parliamentary leader of Poroshenko’s party, who recently called for a full blockade of the two republics, resigned over the summer. Leonid Kuchma, Ukraine’s president in the 1990s, calls for Ukraine to “sever all economic and political relations with these regions controlled by the militants and Russia”. In effect, he’s advocating that the republics should be starved into submission. In addition, a conflict between the far-right and the Poroshenko government has come out into the open. A recent armed conflict between the Right Sector and the police in West Ukraine over control of the black market and the refusal of the right wing battalions in east Ukraine to withdraw, make a long-term compromise very difficult.

Potential to build an alternative

Although it may seem that there is a world of difference between the situations in Ukraine and Syria, the reality is that there is far more in common. In Ukraine and Syria, the military actions of the authoritarian regimes and local warlords, backed by NATO, Western imperialist and Russian military forces, are causing immense suffering to working people. The economic crisis that affects Russia is made worse by the demands for austerity and budget cuts, fuelling poverty, corruption and despair.

But there is also potential to build an alternative to this nightmare: the Ukrainian and Russian working classes are amongst the biggest in Europe and are both suffering from dramatic attacks on their rights and living standards. If the working class was to move into action to prevent wage cuts, jobs losses and budget cuts, it would inevitably also face the need to oppose the authoritarian policies of the ruling elite. Such a struggle based on united action would also mean that in those areas affected by the military conflict the working class would form joint workers’ committees uniting all nationalities to oppose imperialist intervention and force the withdrawal of all foreign forces; to enable working people to decide their fate in open, fair and free elections, supervised by elected, democratic workers’ committees; to guarantee the national and democratic rights, including the right of self-determination, with the building of independent trade unions and mass workers’ parties capable of implementing a programme of land to the masses and the factories to the workers, through a programme for a socialist democratic planned economy, under a democratic and voluntary socialist confederation of the region.

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