Grappling with the bear

What will be the long-term consequences of the incident in Salisbury on 04 March? It seems a new arms race, already underway, has intensified.

Chess-players

In Russia, chess is a spectator sport. I have seen, in Gorky Park in winter, a small crowd form around two players locked in intellectual combat over an oversize chess board. (One could not imagine that in London’s Hyde Park or in New York’s Central Park – not even in summer.) Russians regard chess as a metaphor for strategic thinking – something they admire above all because they believe their nation owes its independence – and it greatness – to great chess-players like Peter the Great, Catherine the Great, Alexander I, Joseph Stalin…

The Putin Opening

Back in 2000 Mr Putin started out as a technocrat determined to restore Russia’s finances. In his first term he was reasonably congenial – except to the Chechen separatists. He scrupulously followed the constitution and stepped down in 2008, giving way to Mr Medvedev – but carrying on as his Prime Minister. In that year Russia made a swift incursion into neighbouring Georgia and snatched two strategically useful territories inhabited by non-Georgian minorities. This was the first time the bear had used his claws for years.

Russian history, really since the time of Peter the Great, has always been characterised by a profound tension between Westernisers and Slavophiles. Westernisers (like Peter) have wanted to reform Russia to make it more like the West. Slavophiles have regarded the West as spiritually tainted and have thought Russia should keep its distance in order to preserve its might.


It is said that the increasingly Slavophile Mr Putin regarded Mr Medvedev as a Westerniser. President Medvedev was too ready to support Western interventions such as the Anglo-French adventure in Libya in 2011. Putin came to believe that only he could redeem Russia. He drew closer to the Orthodox Church and nationalist philosophers like Alexander Dugin who believe in Russian exceptionalism. Russia is not like other countries, they argue: it is a unique civilisation which, though of European origin is not European. Westerners cannot understand Russia because they do not share its soul – a unique wellspring of spiritual and cultural strength.

The Putin elected for his third term in 2012 was bolder. He was determined that Ukraine would not be sucked into the West’s orbit like the Baltics. The penetration of Crimea by Russian Special Forces and its subsequent annexation (after a referendum apparently in favour of “reunion” with Mother Russia) in March 2014 was a watershed. It was now clear to the world that Mr Putin did not play by international rules.

Putin accused

Recently elected to a fourth term as President, Mr Putin now stands accused in the West – though not widely in Asia, bar a few voices in India. The received opinion in the West is that he has developed a new brand of hybrid warfare. This is the synchronised use of hacking, of manipulation of opinion on social media and of Special Forces on the ground. It is providing arms to allies, and using drones and other covert military forces to attack enemies. Nowhere has this hybrid warfare been more evident than in Eastern Ukraine, must of which territory is now out of the effective control of the official Ukrainian government in Kyiv.

He has intervened decisively and ruthlessly in the Syrian Civil War since 2013 to shore up the regime of President Bashar al-Assad while the West has looked on awkwardly. The difference between the West’s and Russia’s aims in Syria is easily summarised. Russia knew what she wanted: to sustain Assad and to annihilate Islamist elements who are allied to Russia’s enemies in the Caucuses. The West wanted to bring down Assad without knowing who might replace him. If the West had been clever, it could have cut a deal with Russia in Syria for the benefit of that country’s people. But now that is too late.

Then Mr Putin’s Russia is accused of interfering in elections in Western states, not least the Brexit referendum and the American Presidential election of 2016. It is ironic that the Americans shamelessly intervened in the Russian presidential election of 1996 in order to secure the re-election of President Yeltsin. That aside, it is very difficult to prove that Russia’s purported cyber-interventions had any tangible effect – let alone that they were decisive. We await the outcome of Attorney Mueller’s enquiry in the USA – but few anticipate anything definitive. In a digital age we should all assume that there are many parties out there who seek to influence us online.

The received opinion in the West is that Putin has developed a new brand of hybrid warfare.

A whole genre of books has emerged about Mr Putin’s Russia. The theme of this genre is that corruption extends to the highest levels, that all Mr Putin’s inner circle have enriched themselves – and that anyone who tries to expose this puts their life in danger. And indeed journalists have been killed – most notably Anna Politkovskaya in 2006. (Her assassins were tried and convicted.) If this is true that would not make Russia the only country where corruption costs journalists lives. In Malta[i] and Slovakia – both members of the EU – investigative journalists have been murdered recently.

Most seriously of all, Mr Putin stands accused of ordering the assassination of his enemies. The main reason why the British government was so incensed about what happened in Salisbury on 04 March was that a similar outrage had happened before – when Alexander Litvinenko was slain in London in 2006 by means of a polonium pill. The then British government (under Mr Blair) was so wrong-footed by this that it simply did not know how to respond.

I suspect it is unlikely that Mr Putin could be convicted of those crimes in an English court of law – the evidence will always remain tenuous. The motive for the Salisbury attack is also obscure since Russian intelligence could have disposed of Mr Skripal when he was in their custody. But the circumstantial evidence points towards the Kremlin. Apparently, the British government has some critical evidence which it has not made public. But the fact that 26 allies (even some who were previously sceptical) have been sufficiently convinced by such evidence to expel Russian diplomats suggests that it must be persuasive.

Putin’s scorecard

With 145 million inhabitants last year Russia had a GDP of $1.5 trillion – a little more than Australia (which has 24 million people) and a little less than South Korea (51 million people). That made Russia’s economy about the twelfth largest in the world[ii]. The gap between China and Russia has widened. Russia’s best friend has a GDP about eight times its own and a population about nine times larger. Increasingly, when these two countries do deals, it is China which sets the price. If I were Russian, I would be less concerned about the West than about China.

Since Mr Putin’s second term the Russian economy has gone backwards. Russia has fallen several places down the global GDP league – mostly on account of the fall in the oil price, on which the Russian economy is still dependent. There has been little diversification out of oil into new manufacturing. Despite its formidable reputation for military might, in dollar terms the Russian defence budget is somewhat less than the increase in US defence spending proposed for this year by President Trump. Russia spends a massive 10 percent of its GDP on defence as against America’s 3 percent. That $150 billion, however, is still more than twice what the UK spends on defence.

Don’t miss Victor’s next piece in the next edition of Master Investor Magazine – Sign-up HERE for FREE

On the diplomatic front, outside Syria, Russia has not been particularly successful. The country’s “friends” are a rum bunch: Venezuela, Sudan, North Korea, Cuba and Serbia. Mr Putin’s belligerence towards Ukraine has pushed all but the Eastern marches of that country closer towards the West. Younger Ukrainians in particular, despite the deep cultural affinities between the two nations, now regard Russia as an implacable enemy.

If Mr Putin’s game plan was to resurrect Russia’s preponderant influence across the Former Soviet Union, again he has not done well. Although he has constructed a customs union with the central Asian states and Azerbaijan, they are looking East towards China for investment and trade. On a visit to Kirgizstan some years ago I was struck that all the highways under construction were not only being built by Chinese construction firms – but by Chinese workers as well. These countries stand on China’s New Silk Road which is now taking shape as a tangible geopolitical strategy. As for the Baltic States – they are now securely anchored in Europe and NATO.

But ordinary Russians still feel better off than in the chaotic days of President Yeltsin. Moscow is full of up-market delis and designer shops. Russians read widely and travel more. They are delighted that Crimea has been returned to the Motherland: their pride has been restored.

The end of arms control?

Ronald Reagan and Margaret Thatcher are often remembered as hawks but it was when they were in power in the 1980s that a comprehensive framework of arms control treaties with the then Soviet Union came into force. This was the result of the Strategic Arms Reduction Talks (START). That framework greatly reduced the risk of war; and even after the Soviet Union dissolved, the Russian Federation (as its designated successor state) became part of that framework.

But under Putin 4.0 – and under Trump 1.0 – that framework is crumbling.

In an address to the Russian Parliament on 01 March Mr Putin unveiled a new generation of “invincible” hypersonic[iii] nuclear missiles designed to evade US missile defence systems. In a series of videos using computer animations one such weapon appeared to be targeting Florida. Nobody listened to us – so listen to us now, the Russian President intoned.


Most US defence analysts believe that these new Russian weapons systems really exist – that the Russians are not bluffing. In testimony before the Senate Armed Services Committee during the week of 19 March, General John Hyten, who is in charge of US Strategic Command, conceded that US missile defences could not stop Russian hypersonic missiles. He said that the US is instead relying on nuclear deterrence, or the threat of a retaliatory US strike. “We don’t have any defence that could deny the employment of such a weapon against us, so our response would be our deterrent force”[iv] he told the Committee.

Mr Putin has justified Russia’s need to develop new nuclear systems by pointing out how the USA walked away from the Anti-Ballistic Missile Treaty in 2002. Some say that Russia’s development of hypersonic nuclear missiles is an attempt to get the US back to the negotiating table.

When Messrs Trump and Putin first spoke by telephone in January last year, Mr Putin asked the incoming President what he wanted to do about the START II talks – but unfortunately Mr Trump knew nothing about them[v]. Since then, it has been the Americans who have spoken about regaining dominance in nuclear weapons. The Nuclear Posture Review, published by the Trump administration in February expands the role of nuclear weapons in US defence strategy by broadening the scenarios in which a nuclear first-strike would be contemplated – and by downplaying the scope of arms control.

Chemical weapons

For years we assumed that chemical weaponry had effectively been outlawed. Until they were first used in the Syrian Civil War in Ghouta[vi] in July 2013 by the forces of President Assad. Military intervention by the US and its allies was averted when Syria volunteered to give up its stockpiles of chemical weapons in a deal brokered by Russia. (The Western will was also undermined by the refusal of the British parliament to sanction intervention and by President Obama’s vacillation). Nevertheless, there have been numerous further instances of the use of chemical weapons in Syria since then: not least in the Khan Shaykhun chemical attack on 04 April 2017 – which prompted President Trump to launch a cruise missile strike on the Assad-controlled airbase at Shayrat.

How has the Syrian regime managed to continue to use chemical weapons against rebel forces (“terrorists” so they would say) over an extended period with impunity? Especially as Syria was a signatory to the Chemical Weapons Convention (CWC) of 1993? Some would say because the regime enjoys the patronage of Russia who has protected it from the most serious diplomatic consequences. Further, people like US Defence Secretary James Mattis have accused Russia of being in breach not just of the CWC but the Intermediate Range Nuclear Forces Treaty (INF Treaty – 1987) as well.

Scarier even than nukes

What’s more, currently a whole array of non-nuclear strategic weapons is also under development that is unconstrained by the current arms treaty framework. New cyber-warfare techniques, artificial intelligence, killer drones and robots, the genetic modification of soldiers…This may sound like science fiction but all these fields of research are already being applied to design new weapons systems. The Russian defence firm Kalashnikov (of rifle fame) has released a video showing how killer robots might use neural networks to learn from mistakes on the battlefield. Search for Killer Robots on YouTube, if you are so inclined. Depending on your disposition you will either be fascinated or appalled.

This may sound like science fiction but all these fields of research are already being applied to design new weapons systems.

Mr Putin has evidently been giving thought to these new technologies. Last year Russia opposed a UN initiative to ban so called Lethal Autonomous Weapons Systems (LAWS) on the grounds that it would inhibit the development of AI. And yet, Mr Putin told a youth group last October that world leaders should agree on strict regulation to prevent the creation of genetically modified soldiers who feel no pain or fear and who would be capable of mass killings without conscience. He said that an army of psychopaths could be created if scientists were allowed to modify mankind’s genetic code. This prospect, he thought, would be worse than a nuclear bomb. We must never forget about the ethical foundations of our work, the Russian President declared[vii].

A new arms race

How would Russia respond if a war breaks out between North Korea and America? How would they handle a war between Saudi Arabia (assisted by Israel) and Iran to whom they supply weapons? We don’t know.

What we do know is that we are on the cusp of the biggest arms race in history. Good news for defence contractors like Boeing (NYSE:BA), Lockheed Martin (NYSE:LMT) and BAe Systems (LON:BA.). Bad news for mankind.

Famously, President Reagan asked his team: What have we got more of than the Russians? The reply was: Money. To which the President riposted: Well, let’s outspend them then! Mr Trump has learnt from The Gipper.

As for Britain, the only way the Russians will take us seriously again is if we restore our armed forces to their previous excellence. That means spending more money. In recent days it seems as if Defence Secretary Williamson will be given some of the cash he has demanded. Mr Williamson, despite his playground manners, understands that it is not so much that Mr Putin is strong, as that we have allowed ourselves to look weak.

A new cold war?

Many pundits have described the grave deterioration of relations with Russia as a new Cold War. The mass expulsion of Russian diplomats by some 23 EU and NATO countries on 26 March (followed by Australia and others) certainly looks like a new freeze in relations.

But, in many ways, the Cold War was a more orderly, rules-based confrontation than what is happening now. In that bipolar world, the Soviet Union and the USA had clearly defined spheres of influence and they knew that any major incursion into the other’s sphere would pose the risk of mutually assured destruction (MAD). Now, there are many more players on the global stage (not least China); the rise of asymmetrical warfare fought largely online subverts traditional military strategy; the range of new weapons systems creates new uncertainties; and the minds of citizens are subject to subtle manipulation. Nothing is true and everything is possible[viii].

Don’t miss Victor’s next piece in the next edition of Master Investor Magazine – Sign-up HERE for FREE

The real fear is that, as in July 1914, something could go horribly wrong – somebody could miscalculate and someone else misjudge; what one side regards as a defensive measure will be seen by the other as nakedly offensive. That people will lose control as events – and robots – take over.

This is therefore a moment for reflection. This weekend and next[ix] Christians all round the world – from Vancouver to Vladivostok – will celebrate the ultimate victory of the Prince of Peace. Even as the new US National Security Advisor, John Bolton, reminds us of the Roman proverb: Si vis pacem, para bellum: If you want peace, prepare for war.


[i] Daphne Garuana Galizia was blown up in car bomb in November 2017 in Valetta. Jan Kusiak and his fiancée were shot at their home outside Bratislava in February 2018.

[ii] IMF estimates for 2017.

[iii] Hypersonic is defined as a speed in excess of five times that of sound.

[iv] Reported in The Hill, 27/03/2018, available at: http://thehill.com/policy/defense/380364-china-russia-eclipse-us-in-hypersonic-missiles-prompting-fears?rnd=1522103327/?userid=166289

[v] Reported in BBC R4’s Analysis, broadcast 26/03/18. Available at: http://www.bbc.co.uk/programmes/b09wrxv9

[vi] A suburb of Damascus.

[vii] See: http://www.dailymail.co.uk/sciencetech/article-5008461/Vladimir-Putin-warns-super-human-soldiers-future.html

[viii] The title of an influential book by Peter Pomarentsev (2016).

[ix] Easter in the Orthodox Church will fall one week later than that in the Catholic and Anglican churches in 2018 on 08 April.

Victor Hill: Victor is a financial economist, consultant, trainer and writer, with extensive experience in commercial and investment banking and fund management. His career includes stints at JP Morgan, Argyll Investment Management and World Bank IFC.