WASHINGTON -- In August of 2008 at the Beijing Summer Olympics President George W. Bush had a talk with President Vladimir Putin. Georgia's anti-Moscow president, Mikheil Saakashvili, had been uttering provocative sonorities about Russia, so Russian troops marched into Georgia much as they are doing today in Crimea. Bush reminded Putin, "I've been warning you Saakashvili is hot-blooded." To which Putin suavely responded, "I'm hot-blooded, too." Bush's rejoinder was "No, Vladimir. You're cold-blooded." Well, whether the president of Russia is hot-blooded or cold-blooded or bloodless, his troops are in Crimea now, and Russia still has the same problem it had at the end of the Cold War. Its economy is not quite modern. In fact it is sickly. Its growth rate last year was 1.3 percent, hardly capable of sustaining a modern military.
Back in the days when Moscow's generals and admirals commanded 4.3 million troops (now the figure is down to less than 1 million) they understood the weakness of their economy. In the late 1980s, after watching President Ronald Reagan's breathtaking military buildup, they prevailed on the Soviet Union's comrades to end the Cold War. They recognized that they could not keep up with the West. For one thing, they could not machine parts for a modern war machine.
There followed years of economic dislocation and uneven growth, but in the first part of this century Putin seemed to be minding the economy better than his predecessor Boris Yeltsin. He tamped down inflation and political turmoil. The budget became manageable. The world price of oil favored Russia. Per capita growth rose from $1,500 to $10,000 in the first decade of the 21st century. Putin and his protege, Dmitry Medvedev, were moving Russia towards an authoritarian system, which was worrisome, but the economy seemed healthier.
Yet it was heavily dependent on oil and gas, which should have fetched Putin's concern. In a vigorous economy such as Korea or the Czech Republic, manufacturing contributes at least 20 percent of GDP. In Russia that figure is 15 percent. According to the International Monetary Fund's figures, if you leave out oil and gas Russia's non-oil revenues are now in 11 percent deficit of GDP, and now Russia is taking on an economic basket case, Crimea. It will cost Moscow billions.
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