Russia's inherent weakness

Bret Stephens:

'In Russia," wrote the great scholar of Russian imperialism Dietrich Geyer many years ago, "expansion was an expression of economic weakness, not exuberant strength."

Keep this observation in mind as Vladimir Putin and his minions bask in the glow of Western magazine cover stories about Russia's "resurgence" following its splendid little war against plucky little Georgia. The Kremlin is certainly confident these days, buoyed by years of rising commodity prices and a bullying foreign policy that mistakes fear for respect -- the very combination that made the Soviet Union seem invincible in the 1970s.

But the Soviet Union wasn't invincible. And here's a crazy thought: The same laws of social, economic and geopolitical gravity that applied in Brezhnev's U.S.S.R. apply equally in Mr. Putin's KGB state.

Take something as basic as demography. "In the next four decades," noted CIA Director Michael Hayden earlier this year, "we expect . . . the population of Russia to shrink by 32 million people [to about 110 million]. That means Russia will lose about a quarter of its population. To sustain its economy, Russia increasingly will have to look elsewhere for workers. Some of them will be immigrant Russians coming from the former Soviet states, what the Russians call the near abroad. But there aren't enough of them to make up that population loss. Others will be Chinese and non-Russians from the Caucasus, Central Asia and elsewhere, potentially aggravating Russia's already uneasy racial and religious tensions."

Or take oil and gas production, which accounts for one-third of the country's budget, 64% of its export revenue, 30% of foreign direct investment, and a little more than 20% of gross domestic product.

There's bad news here, too. Oil production is set to decline this year for the first time in a decade, a decline that is widely expected to accelerate rapidly in 2010. Of Russia's 14 largest oil fields, seven are more than 50% depleted. Production at its four largest gas fields is also in decline. Russia drilled about four million feet of new wells last year. In 1990, it drilled 17 million.

None of this is because Russia is necessarily running out of oil and gas: Existing fields could be better managed, and huge expanses of territory remain unexplored. Instead, it is a function of underinvestment, incompetence, corruption, political interference and crude profiteering. "If you're running Gazprom but you don't really own it, then your interest is in maximizing short-term profits, not long-term development," a Western diplomat told McClatchy's Tom Lasseter.

Amazingly, the system is of deliberate design, as if nothing was learned from the collapse of communism. Parastatal companies are rarely if ever efficient. Yet Mr. Putin has gone about effectively nationalizing entire industries. Foreign investors crave predictability. Yet Mr. Putin has created conditions which his own president, Dmitry Medvedev, calls "legal nihilism." Foreign customers of Russia's commodities seek reliable supplies. Yet Mr. Putin has made no secret of his willingness to turn the energy spigot off whenever it suits his political convenience.

With the exception of Robert Mugabe, no other leader has so completely fouled his own nest as Mr. Putin, or squandered so much international good will....

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Putin is a cheat. He cheats those close to him and those who are not. He has stolen the wealth of Russians and has stolen the investments from the west. The Russians have no other place to go and many whose property was stolen are in jail. Those who escaped the new gulag are threatened with KGB style execution. The western investors will not put their money at risk in Russia as long as Putin is there to steal it again. That is why those oil and gas fields are declining. Putin's greed has made him poorer.