Russia Updates: Luzhkov, Rearmament, GDP

As you may have noticed, posting has slowed down in the past few days, mostly thanks to a combination of (1) Kindle, (2) 中文 and (3) the natural periods of apathy that afflict most non-pro bloggers. I don’t really see that changing until the end of the year…

1. Sayonara, Luzhkov. Props to Jesse Heath for predicting it, Patrick Armstrong for IMO the best summary, and STRATFOR for the most bizarre interpretation (they think Luzhkov was dismissed because the Kremlin no longer needs him to control the Moscow Mob). The best way of viewing this is not as a struggle between the tandem, or even Medvedev asserting himself, but as the latest stage in the campaign to replace entrenched regional barons with civiliki that are closer to the Kremlin. This appears to be part of the overall Kremlin drive towards greater centralization and technocratic management.

2. Structural Remilitarization? Of far greater long term import than the political scuffles around the Moscow mayoralty is the gigantic, even prodigal, plans and figures are being bandied around by senior members of the Russian leadership for the 2011-2020 rearmament program (1, 2, 3). The main points of the program are to spend 22 trillion rubles (c. $700bn) over the next decade to modernize Russia’s increasingly obsolete military hardware, complementing domestic items with imports from foreign countries like Israel, France and the US*.

These are huge sums for an economy with a nominal GDP of $1230bn in 2009 (the US has $14.3tn). To put this into perspective, taking into account changes in relative prices, $700bn of dollar spending in Russia would translate into about $1200-1500bn in the USA (e.g. just compare the unit costs of equivalent fighters, the higher salaries of researchers, etc). That’s $120-150bn in procurement and R&D per year. For comparison, in 2009 the US spent $219bn, and this figure is likely to decrease in the years ahead due to fiscal constraints and withdrawal from Iraq and Afghanistan. As Steven Rosefielde speculated back in 2004, we may see the start of a “full-spectrum, fifth-generation rearmament” next year. If so, the wisdom of this course must be questioned:

  • Thanks to peak oil and growing demand for natural resources, this is now fiscally feasible (unlike in 2000, or even 1990 for that matter). But Medvedev’s absurd claims that military modernization is going to be “a generator of innovation” to the contrary, these investments are more likely to distortive and misallocative.
  • The move towards professionalization has been a flop and it is now evident that the conscription system will be retained for the foreseeable future (with minor adjustments, such as stricter controls on waivers, to make up for the coming 40% reduction in the pool of conscript-aged men due to the fertility collapse of the 1990’s). This is unfortunate, not only becausededovschina remains as prevalent as ever (the cutdown in military service to one year has altered the pattern of hazing, from age-based hierarchy to alpha/beta-male in/out-group dynamics), but because Russia has no discernible need for a million-strong military.
  • What exactly is the use of so many soldiers with 5th-gen hardware? Countries like Georgia, Azerbaijan or Uzbekistan are already walkovers. In the South Ossetia War of 2008, the main problem wasn’t with the weaponry, but with “softer” factors such as unit coordination. There is a vast range of non-military levers that can be used against Belarus or Ukraine. War with NATO is almost entirely theoretical, and as with China, will probably have a nuclear endgame.
  • Another factor that is often overlooked is the danger of over-investing into the 5-th gen paradigm, and in doing so becoming locked into it (e.g. much like the USSR build thousands of tanks in the early 1930’s that were obsolete by the time 1941 rolled by). In reality, it is just a transitional step towards the real face of future war: drone fighters; all-electric ships with railguns and laser weapons; massively networked forces with a plethora of robotic platforms, etc.

* I suspect that the reason why Russia finally disallowed weapons sales to Iran, including of the S-300, was because of an informal deal with the US allowing it market access to some of its military technologies.

3. Heatwave Toll. The demographic stats are showing a big mortality spike in July-August 2010 due to the Great Russian Heatwave, especially in the central and Volga regions. The overall excess mortality during the period is now at around 55,000 – almost twice as much per capita as during the 2003 European heatwave in France. Detailed info on Rosstat’s demography page.

4. Russia’s GDP up 30% this year!!! That is, unless (1) the World Bank made a clerical error or (2) the IMF and CIA are more reliable. 😉

I was looking through Wikipedia’s latest GDP lists and observed that the World Bank’s estimate for Russia’s real GDP in 2009 was $2.7tn, which is $18,900 per capita. (The IMF and CIA estimates are unchanged at the usual $2.1tn.)

IF accurate, the World Bank revision would indicate Russia is the world’s sixth largest economy and within spitting distance of Germany’s $3tn economy. In per capita terms, it would put it in the same league as Poland, Estonia and Hungary or nearly 60% of the EU average.

So what gives? In your opinion, are the newer estimates more accurate? Were there any political motivations behind it, e.g. the reset?*

* The IMF and WB are not unknown to sometimes make drastic changes in
GDP estimates. For instance, two years back China’s real GDP suffered
a 40% cut. Perhaps not entirely coincidentally, China was within spitting distance of overtaking the US at the time of the revision!

5. Is Russia really more corrupt than Greece, let alone Pakistan? Stay tuned for the Karlin Corruption Index, a sequel to the Karlin Freedom Index.


  1. Anatoly, welcome back.

    I don’t know if you’re learning written Chinese, spoken Chinese or both. If you’re learning the written version, I would recommend Anki, a spaced-repetition program that I’ve been using for a while here:

    It’s like flashcards, only smarter.

  2. Thanks, I’ll check it out! It’s the whole farm – spoken, written, listened, etc.
    BTW, I see you’re rather despairing of the whole learning-Chinese enterprise. 😉

  3. On the matter of national income: here’s a rather (for Americans) alarming chart from Eurostat. It shows that Europeans’ net income has been zooming past Americans’ over the past few years. Any thoughts on this?:

    • Those seem to be all in nominal € figures. What matters is the real purchasing power of that income, and by that metric I believe the US remains substantially ahead of the EU.

      (Of course there’s a lot of other factors, such as inequality and state services, that complicate the picture but tend to tilt the advantage to Europe. One can spend hours pursuing these trans-Atlantic pissing matches, but in the end IMO it boils down to a pretty simple formula: if you’re rich, high-IQ, entrepreneurial – the US is better for you; if you’re not rich, average-IQ, non-entrepreneurial – stick with Europe.)

  4. sinotibetan says:

    ” The best way of viewing this is not as a struggle between the tandem, or even Medvedev asserting himself, but as the latest stage in the campaign to replace entrenched regional barons with civiliki that are closer to the Kremlin.”
    Are the civiliki and siloviki working together or are they rivals? The ex-mayor was a memeber of neither the civiliki nor the siloviki if I am not mistaken.

    Regarding the Chinese language, it’s a difficult language indeed! The tones are the difficulty but Mandarin has ‘only’ 4 tones compared to Cantonese or Southern Min dialects( I think 6 or more tones!). The current ‘modern’ ideograms are not as ‘beautiful’ as the traditional ones.
    Good luck with learning Chinese!


    • I think that, as in most natural systems, it’s a mixture of symbiosis and competition. I certainly think the “Kremlin Clan Wars” meme vastly overstates the degree of conflict.

      True. Luzhkov was one of the most prominent Yeltsin-era regional barons, along with Shaimiev of Tatarstan and Rakhimov of Tatarstan. He made good with the Kremlin following the defeat of his alliance with Primakov against the Yeltsin Family / Putin in the 1999 Presidential elections, and since then he has made a show of subordination before the center while running Moscow as his own quasi-fiefdom (even known as “The System”).

      For whatever reason, by 2010 the Kremlin got tired of Luzhkov, and felt the need to expel him to gain more direct control of the Moscow system. His vacationing while Moscow burned provided a good pretext, Nemtsov’s and Zhirinovsky’s kompromat provided the evidence. As Jesse Heath noted, “all the ponyatiya and unwritten rules in the world won’t save you from a half-week-long character assassination on Russian television.” And after that, sending the Moor home was a walk in the park.

      Re-Chinese. Vietnamese also has 6 tones. Pity the poor bastard who has to learn to speak it, I’m finding the 4 tricky enough. This might be my lack of cultural understanding showing, but I much prefer the Simplified script. It might come back to bite me in the ass when I move beyond a few hundred characters, but for now I much prefer to write characters in 5-10 strokes than 10-20 strokes. 😉

  5. sinotibetan says:


    Wow…thanks for your thoughtful and prompt reply!

    I salute you for not only learning Chinese but that you even dared to attempt it! I enjoy your website. You give such clear analysis of Russia missing from ‘mainstream’ media. Cheers!


  6. Hi, Anatoly, welcome back, you were missed! You implied that you had purchased a Kindle? What do you think of it? I was thinking of purchasing one, then I heard that they do not support Russian fonts, and that no Russian books are available on Kindle. Since my main application would be downloading Russian books, I decided to hold off on my purchase.

    • If you get a Kindle, make sure it’s the latest generation one. It *can* read Cyrillic fonts (as well as Chinese, Arabic, etc), it can also read .pdf’s, .doc’s, .html’s, and a few other formats. Since most Russian books can be “found” floating round cyberspace, Kindle should be OK for that. You’re correct, though, that Kindle Store doesn’t offer any – or almost any – Russian books for *legal* download, presumably because the market demand simply doesn’t exist.

      As for its mechanics, I’d give it a 5/5. First, it’s actually easier to read than paper books (for me anyway). Second, if you buy it with the cover/lighting thing, you can also pretty easily read it in the dark. Third, the text to audio is surprisingly good. Fourth, it also has wireless.

  7. Can’t be bothered writing a separate post for this, so here goes:

    Russia is limiting access to the Eurobond market to prevent a repeat of the surge in foreign- currency indebtedness that triggered company bailouts in 2008 as borrowing costs tumble.

    The government created a group last week to monitor overseas debt by state companies and “systemically” important financial institutions.

    Back in December 2008, I wrote:

    A wave of consolidation will occur in the Russian banking industry, Russia Inc. will close the oil windfall-foreign intermediary-cheap credit loop that was its prior financing mechanism and the country will emerge with a stronger, self-sufficient financial system.

  8. Oleg Primakov says:

    PREDICTION: Luzhkov to get charged over corruption & become a pro-Western democracy hero
    I suspected Luzhkov would get dismissed, but wussed out of making a prediction. So I’ll do so now. Within the next 3 months Luzhkov is going to get hit with corruption charges and will either go on trial or seek political asylum in the West …

    Yes ther are a lot of Stalinist PIGS in the West , one more does not make any difference .

    Moscow Mayor Luzhkov favours Stalin posters

    Evgeniya Chaykovskaya

    Moscow Mayor supported a plan to display posters with images of Soviet dictator Josef Stalin during the celebrations of World War Two Victory Day in May.

  9. So Russia has an economy the size of Germany and will possibly rise close to the size of Japan. However, that’s still a lot of military hardware they buy, actually turning them into a great power again. The Mistral-class purchases and some light carriers would give them also blue water capability, not a bad choice with the decreasing ice cap. But aside from reasserting Russia as a very big power (with lots of military assets again), I really don’t see any reason for such a buildup expect countering the Chinese buildup and thus moving into a kind of loose alliance with the West. Russia’s Western neighbors are allied, but keep military spending very low. These Russian investments mean that China once again is reminded of not living on an island and having two powerful neighbors with very friendly relations with each other, Russia and India, who both have access to advanced arms from the West besides their own manufacture. So the Russian army once again forces the Chinese navy not to procure so many ships to face the US navy because a strong buildup of the Chinese land warfare capabilities is needed (Sounds almost like Prussia and Britain vs. France).
    Is there an anti-Chinese alliance forming in order to counter the next superpower?
    Or does this massive military investment have another purpose?