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Putin: the Opportunist

On By AdminIn Russia, STRATFOR1 Comment

This article is part of a series authored by STRATFOR – a geopolitical intelligence firm that provides strategic analysis and forecasting. For other articles by Stratfor click here.

Last October, when Russia had just begun its military intervention in Syria, U.S. President Barack Obama spurned the idea that Russia could challenge U.S. leadership in the Middle East. In a 60 Minutes interview, he said, “Mr. Putin is devoting his own troops, his own military, just to barely hold together by a thread his sole ally. The fact that they had to do this is not an indication of strength; it’s an indication that their strategy did not work.” Two months later, as Russia’s military presence in Syria deepened further, Obama remained dismissive of Putin’s strategy, noting that “with Afghanistan fresh in the memory, for him [Putin] to simply get bogged down in an inconclusive and paralyzing civil conflict is not the outcome that he is looking for.”

Washington can continue to underestimate Russia at its own peril. Russia has indeed poured resources into a maddeningly inconclusive conflict, but so has the United States and so will others who cannot be tempted away from the geopolitical proxy battleground complicated by the presence of jihadists. The problem is that the layers to Russia’s strategy tend to be too dense for the Western eye. For Russia, the Syrian battleground is not about propping up an ally through reckless spending, nor is it simply about pursuing an alternative strategy to defeat the Islamic State. Syria is a land of opportunity for Russia. This is the arena where self-control, patience and a careful identification and exploitation of its opponents’ strengths and weaknesses will enable Russia to reset its competition with the West.

Realpolitik, Russian-Style

The Russian economy is staggering amid low oil prices. Kremlin power struggles are intensifying. And social unrest is increasing nationwide. The United States is reinforcing European allies all along Russia’s western flank. This scene does not suggest a perfect record for the Russian leader, but Putin is also a skilled practitioner of realpolitik. Moscow has a sober ruthlessness and resourcefulness that it will employ to try to make up for its most obvious weaknesses.

In Realpolitik: A History, historian John Bew gives credit to an oft-overlooked German politician, August Ludwig von Rochau, for conceptualizing the pragmatism behind this political philosophy. In Foundations of Realpolitik, which Rochau wrote in the mid-19th century during the formative years of the German nation-state, he said, “The Realpolitik does not move in a foggy future, but in the present’s field of vision, it does not consider its task to consist in the realization of ideals, but in the attainment of concrete ends, and it knows, with reservations, to content itself with partial results, if their complete attainment is not achievable for the time being. Ultimately, the Realpolitik is an enemy of all kinds of self-delusion.”

Rochau’s profile of a state run by realpolitik has Putin’s Russia written all over it. Russia’s inherent vulnerabilities may deny it lasting glory, much less the ability to put the brakes on Western encroachment. Moscow will, however, be quick to come to terms with uncomfortable realities and will take what it can get when the opportunity arises.

A skilled opportunist will create the opportunity he or she seeks to exploit. Syria is the contemporary axis of geopolitical conflict. By enabling a loyalist siege on Aleppo, Russia has demanded the attention of Berlin, Washington and Ankara in one fell swoop. Some 100,000 Syrians have fled Aleppo in the past two weeks, and that number could rapidly multiply if the city is besieged.

For German Chancellor Angela Merkel, that means another wave of migrants that will push Europe deeper into crisis as borders snap shut along the Balkan route, nationalist political forces capitalize on fear and unrest driven by the migrant flows, and problematic debtor states in the southern periphery use the crisis to charge back at Berlin and Brussels for burdening them with a refugee crisis while trying to crush them with austerity measures. It is no coincidence that Russia is using every opportunity to endorse and amplify the views of those very same Euroskeptic forces that are giving Merkel and other mainstream politicians in Europe a daily migraine as they warily shift further to the right to remain tolerable to their constituencies.

Putin cannot halt the flow of migrants to Europe, but Russia’s military involvement in Syria does give him the power to increase the pain on Europe. That could prove a useful lever for Russia; using it allows Moscow to divide the Continent and potentially extract a veto from within the bloc on issues such as continuing Russian sanctions and responding to Poland’s request for permanent bases on Europe’s eastern flank.

For U.S. President Barack Obama, the siege on Aleppo represents an attack from all directions. Russia’s attempt to accelerate the fragmentation of Europe undermines a critical network of U.S. allies while creating the potential for much bigger crises on a Continent that, for all its sophistication, is hardly immune to barbaric conflict. As U.S. Secretary of State John Kerry said this past week at the Munich Security Conference, “We in the United States aren’t sitting across the pond thinking somehow we’re immune … America understands the near existential nature of this threat to the politics and fabric of life in Europe.” The White House may understand what lies at stake at the intersection between the European crisis and the Syrian civil war, but it is also less prepared to manage Russia’s role in this meta-conflict.

It is well known that Russia has been bombing many of the rebels whom the United States needs as ground proxies in the fight against the Islamic State. Even at tepid points of negotiation, like the cease-fire announcement that emerged from talks between Kerry and his Russian counterpart, Sergei Lavrov, at Munich this past week, major caveats are created for Russia to exploit. While playing the role of the diplomat and shuttling between capitals to organize peace talks over Syria, Russia can continue bombing at will, claiming that it is targeting Jabhat al-Nusra and other targets on its black list. And so long as Russia can play the role of the spoiler, the United States will lumber along in the fight against the Islamic State in Syria at a frustratingly slow pace.

Playing the Kurdish Card

For Turkish President Recep Tayyip Erdogan, the Russian-backed loyalist offensive in Aleppo brings Turkey’s geopolitical imperatives to the fore. The most obvious stressor on Turkey is the potential for tens of thousands of refugees to continue spilling across the border at the same time Europe is curbing the flow of migrants on the Continent. Turkey’s long-proposed solution to this dilemma is not to do Europe any favors by simply absorbing the refugees itself but by creating a “safe zone” in northern Syria where refugees would reside and where Turkey could establish a security perimeter. With a security footprint in northern Iraq, Turkey could then establish a blocking position against the Kurds in northern Syria.

As its relationship with Turkey deteriorated, Russia made no secret of its growing communications with Kurdish rebels in Syria belonging to the People’s Protection Units (YPG). This is an old play in the Russian handbook. As I discussed in an earlier weekly, 1946 was pivotal to understanding the fundamental tension that has persisted between Turkey and Russia for centuries. This was a time when the Soviets, wary of a growing relationship between the United States and Turkey, were also casting a covetous eye on the Turkish-controlled straits, which provided critical access between the Black Sea and the Mediterranean.

The Soviet Embassy in Ankara delivered reports to the Soviet Foreign Ministry on “the Kurdish question,” and Soviet propaganda carefully leaked bits of such reports in the press to ensure that the Turks, as well as the Americans, were aware that Moscow was studying the Kurdish question and was prepared to help ignite Kurdish separatism in the fledgling Turkish republic. One report from December 1946 compiled by the Soviet Foreign Ministry’s Department of the Near and Middle East highlighted that the Czarist government played the Kurdish card regularly to weaken the Ottoman Empire during the late 19th century when it “stirred up discontent with the Turkish government among the Kurds and bought their support with money and lavish promises.”

The lavish promise that Russia can hold in front of the Kurds today is the prospect of a united and autonomous Kurdish state stretching from Rojava in Syrian Kurdistan to northern Iraq. Indeed, the Russian-backed loyalist offensive in Aleppo has enabled the YPG to move beyond its territory in northwestern Syria eastward toward Azaz along the Turkish border. From Turkey’s point of view, the longer Ankara remains behind the Turkish side of the border, the better the chances that Afrin canton has to eventually link up to a swathe of Kurdish-controlled territory west of the Euphrates River, creating a de facto Kurdish state on the Turkish border to go along with the already autonomous and independence-minded Kurdistan Regional Government in northern Iraq. Even if legitimate obstacles render such a scenario unlikely on the battlefield in the near term, Turkey will nonetheless be operating under these assumptions.

And Russia knows not only how to get under Turkey’s skin but also how to make Turkey break out in hives over the Kurdish threat. In a very public move, Russia last week took the liberty of inaugurating an office in Moscow for the Democratic Union Party, the political arm of the YPG in Syria, inviting members from Turkey’s pro-Kurdish opposition People’s Democratic Party and even representatives from Ukraine’s rebel Donbas region for good measure. Bestowing legitimacy on the Kurdish rebel groups that Turkey is painstakingly trying to exclude from the negotiating table while enabling Kurdish rebel advances on the Syrian battlefield was simply too much for Erdogan to bear. As a result, Turkish artillery is now pounding YPG positions in the north around Azaz and Tel Rifaat, and Turkey is repeating the same message back to the White House: Washington and Ankara will just have to agree to disagree on the Kurdish question in Syria.

In our 2016 annual forecast, we highlighted that Russia will intensify its air operations in Syria to try to tie Turkey’s hands but that inaction was not an option for Ankara. Instead, driven by the Kurdish threat among other factors, Turkey would assemble a coalition including Saudi Arabia to mitigate obstacles on the Syrian battlefield. This is exactly the scenario currently in play, with Saudi Arabia and the United Arab Emirates preparing to carry out operations from Turkey’s Incirlik base. Turkey will not allow itself to be tied down by the Russians and will do whatever it takes to force the U.S. hand in enabling a Turkish military move into northern Syria. The Turkish message to Washington is that the Turkish government cannot be regarded as just another tribe or faction on the Syrian battlefield; instead, it is a nation-state with national interests at stake. As Turkish Deputy Prime Minister Yalcin Akdogan said, you cannot play defensively at all times and still expect to win a match.

The United States does not mind Turkey’s being on the offensive in northern Syria if it means stronger action against the Islamic State, but there is still the matter of dealing with Moscow. Turkey, not to mention Saudi Arabia and the United Arab Emirates, is not about to make an impulsive move in northern Syria. All three countries understand the risks associated with putting forces in the air and on the ground with Russian — and potentially even Iranian — fighter jets operating in the same space. The proliferation of players on the battlefield is inevitable, but the task of mitigating the potential for skirmishes falls to Washington.

Bringing the Negotiation Back to Washington

With Aleppo fully in play, all Putin had to do was wait for the phone call. On Feb. 13, the White House told the media that Obama called Putin and urged him to end the Russian campaign in Syria. We can assume that the conversation went well beyond the United States telling Russia to stop it. Russia, after all, designed its intervention in Syria with the hope of it culminating in an understanding with the United States. Syria holds a layer of strategic interest on its own for the Russians, but Syria by itself is eclipsed by a Russian imperative to slow the encroachment of Western military forces in Russia’s former Soviet periphery. While Ukraine remains in political limbo under an increasingly fragile government in Kiev, an increasingly coherent bloc of countries in Eastern Europe is forming around the Visegrad Group (Poland, Hungary, the Czech Republic and Slovakia). Poland, in particular, is pushing for a more robust NATO presence on Europe’s eastern flank with Russia. To improve its chances of coaxing NATO into fortifying its position, Poland is sending a few F-16 fighters to support the mission in Syria as a show of good faith. Discussions meanwhile continue between Washington and Bucharest over boosting NATO’s deployments to the Black Sea, with Turkey more willing to entertain such discussion now that its relationship with Russia has hit the floor.

These are all measures that the United States can escalate or de-escalate depending on how it wants to direct the negotiations it is conducting with Moscow. The United States can assure Moscow that limits will be placed on NATO’s plans for Europe, though any such assurances could well expire with a new president in the White House come January 2017. The United States has also attempted to nudge Kiev on making political concessions toward the eastern rebel regions in Ukraine, but thegovernment is simply too weak and sorely lacking in political will to make the kinds of compromises that would satisfy Moscow.

In Search of Russia’s Achilles’ Heel

Russia has played the Kurdish card effectively against Turkey, but could Moscow eventually get a taste of its own medicine? The volume and spread of Russian protests across the country have increased significantly over the past year as the economic crisis has deepened. Even as the Russian government has pre-emptively cracked down on opposition groups, disgruntled workers and nongovernmental organizations that outsiders could exploit to destabilize Russia from within, it would be impossible to seal all of its cracks.

Legislative elections are slated for September, elections that could test whether a large number of disparate protests can cohere into a more substantial threat on the streets. Even as the Kremlin threatens to place missiles in Kaliningrad, Russian security forces have been cracking down heavily on opposition forces in the exclave territory on the Baltic Sea, where any hint of secession or questioning of Russia’s control over the territory will rapidly capture the attention of the Kremlin.

Russia’s main vulnerabilities tend to be concentrated in the Muslim-majority North Caucasus, where Putin built a legacy on ending the Chechen war. To uphold that legacy, Putin has gone out of his way to endorse the antics of Ramzan Kadyrov, the firebrand leader of Chechnya whose Instagram displays of loyalty to Putin and Trump-like rhetoric have had a polarizing effect on Russian opposition, hardcore nationalists and powerful members of Russia’s Federal Security Bureau. Nonetheless, Kadyrov is a tool to contain Chechnya that Putin will not be willing to sacrifice any time soon. Perhaps more problematic for Putin is a rise in Salafist and ultra-conservative influence in Dagestan, where crackdowns and militant activity are rising and where an overconfident Kadyrov could end up using instability in Dagestan to extend his territorial control.

These pressure points on Russia will be important to watch in the months ahead as Russia navigates the bends and bumps in its negotiation with Washington, Ankara, Berlin and the Gulf states. At the same time, it would be a mistake simply to assume that unrest in Russia will organically swell to the point of overwhelming the Russian government and forcing a reduction in military activities abroad.Russia’s ability to absorb economic pain is higher than most, and the decision to continue operations in places such as Syria and Ukraine rests on far more than financial considerations.

Know Thy Enemy

As the United States calculates its next moves, it must understand the layers to Russian strategy and avoid simplistic characterizations. It is easy to brand Putin a thug and a bully, but Putin understands the limits of brute force and, more important, internalizes the notion of using an enemy’s force against him. This is reflected in his love of judo, which he often describes as a philosophy and way of life. As Putin says, judo teaches that an apparently weak opponent can not only put up a worthy resistance but may even win if the other side relaxes and takes too much for granted. Back in October, the White House and others derided the Russians for not learning their lesson in Afghanistan, expecting the combination of an economic recession and a resource-intensive civil war in Syria to come back to bite the Russians. That day could still come, but the West should not wait for it either.

There is a long stretch in between where Russian strategy will have the potential to penetrate deep into the U.S.-led fight against the Islamic State, the European crisis and Turkey’s existential battle with the Kurds. Putin has already spent a great deal of time, energy and resources into setting up this stage of its negotiation with the United States, but he will also not be deluded by the idea that he can fully attain its geopolitical goals. The realpolitik side of the Kremlin will content itself with partial results, and those results may show themselves on the Syrian battlefield, in eastern Ukraine or — should negotiations fail — not at all. In case of the latter, the next phase of crisis that results will extend well beyond the besieged city of Aleppo.

The Global Banking System Faces an Existential Threat

On By AdminIn Financial Crisis, STRATFORLeave a comment

This article is part of a series authored by STRATFOR – a geopolitical intelligence firm that provides strategic analysis and forecasting. For other articles by STRATFOR click here.

Christmas did not offer much good cheer to the world’s bankers, who have received a sustained kicking since the financial crisis erupted in 2008. In the latest blow, Switzerland announced that it would hold a referendum on a radical proposal that would strip commercial banks of the ability to create money, depriving them of a great deal of their profit-making capabilities. If the Swiss proposal catches on around the world, it could shred core business assumptions that have underpinned the banking model over the past three centuries.

From Babylon to the Central Bank

The earliest banks we know of, in ancient Babylon, were temples that doubled as repositories where one could store wealth. At some point, the guardians of the stored treasure realized they could put this accumulated wealth to work, and banks accordingly began to lend capital. Borrowers would pay interest on what they borrowed, and this interest would ultimately find its way back to the lenders after the banks had taken a cut. The banks became trusted intermediaries that brought lender and borrower together and ensured neither would be cheated. Paper money emerged after people found it was easier to buy things using deposit slips from their bank than carrying gold around.

The next evolution happened when bankers realized that since depositors almost never simultaneously withdrew all their funds, banks could lend more capital than had been deposited. This allowed banks to “create” money in the sense that bankers could issue loans not necessarily backed up by hard deposits. Creating revenue in this way proved lucrative, but it brought banks into conflict with rulers, who were notionally in charge of the state’s money supply and any gains to be made from it. In England, whose financial system is in many ways the progenitor of today’s global system, this battle was played out between banker and ruler in the 16th and 17th centuries.

Ultimately, in 1666 King Charles II — well aware of the limits of his own power thanks to the beheading of his father 17 years earlier — put control of the money supply into private hands. The privatization of the money creation process gave birth to the system we use today, in which private or commercial bank loans are responsible for 97 percent of the money circulating in the modern global economic system. In another change, 28 years after Charles II’s reform, an enterprising group of businessmen offered the government cheaper loans in exchange for certain privileges, such as a monopoly over the printing of physical currency, and so the Bank of England was born.

The benefits of the new system proved immediately apparent. Interest rates on government borrowing dropped from 10-14 percent in the 1690s to 5-6 percent in the early 1700s. This allowed Britain a great deal of leeway when it came to military spending, which it soon put to use. But the privatization of money creation also came with drawbacks, namely the economic cycle of boom and bust. Leaving the money-lending and -creating decisions up to banks resulted in a system of extremes where bankers created speculative bubbles via vast quantities of loans and money when times were good, only to refuse to lend — in a sense destroying money — once an ensuing speculative bubble burst.

This led to liquidity crises, with the South Sea Bubble of 1720 providing early evidence of this mechanism kicking into action. The fact that banks were lending more money than they could back up with capital also left them exposed to bank runs whenever the public lost confidence in them. The reserve ratio, which requires banks to keep a fraction of their loans backed by safer assets such as government debt or central bank money, is an attempt to keep this threat at bay. But it is an inherent characteristic of so-called fractional reserve banking that the risk of bank runs is ultimately inescapable.

Britain, and indeed all the other countries that came to adopt the system, grew accustomed to a regular waxing and waning of the money supply and to the consequent up-and-down economy. There were ways to palliate this cycle, with the Bank of England slowly developing into the stabilizing force it is today. In times of crisis, the Bank of England would lower interest rates and flood the market with liquidity, bailing out any solvent but illiquid banks to keep the system functioning, thus smoothing the money supply’s wilder fluctuations.

As British and then American influence spread, so did banks’ power, and capital flowed ever more freely around the world as domestic deposits were used to finance international projects. The system was heading for a fall, however, when World War I created great economic imbalances between Europe and the United States. In the 1920s, the Federal Reserve attempted to restore prewar parity by keeping interest rates artificially low, but this led to abundant speculative U.S. capital flooding across the Atlantic, particularly into Germany. The ensuing giant bubble finally popped in 1929, leading to the dramatic liquidity shortages of the Great Depression and creating the circumstances that culminated in World War II. The experience led to the partial reining in of banks, with the Glass-Steagall legislation in the United States in the early 1930s limiting their ability to take part in speculative investments.

Time has a way of chipping away at such precautions, however, and the banks gradually escaped their shackles and capital came to flow freely around the world once again. More countries became accustomed to the ebb and flow of bubble and crisis, though these crises tended to be more regional in scope (e.g., Latin America, Asia, Scandinavia). When global crisis finally struck again in 2008 it was different from 1929 in that there was no world war to blame for the global economic imbalances; this crisis followed an extended period of the banks having had things pretty much their own way. Instead, it was a giant version of the regular crises inherent in the system. This led to the thinking that it is the banks, and indeed the system they created around themselves, that need changing. In the eight years since 2008, layer upon layer of 1933-style regulation and restriction have thus been heaped on the banking sector.

A Radical Reform

It is into this atmosphere that the idea of stripping banks of their money-creating abilities has gained currency (regained, in fact, since calls for it date back at least to the 1930s). According to its proponents, the way to root out the instability inherent to the system is to require banks to back their loans 100 percent with reserves. This essentially would be a step back to the point where banks would again function as conduits rather than creators of capital. Under the reformed system the creation of new money would instead be the prerogative of the central bank and the government. These national institutions would in theory be motivated by the needs of the state rather than by short-term profit and would keep the money supply growing at a fixed rate, doing away with the wild fluctuations of the credit cycle. (One challenge to overcome would be politicians attempting to hijack the money supply for short-term political gain.) Proponents of such a system point to many expected benefits: bank runs would be eliminated, the proceeds of money creation would go to the government and thus the taxpayer rather than to the banking elite, government debt would be a thing of the past, and private debt would be greatly reduced. (Indeed, the predominance of debt in today’s world is partly a product of it being required in the money creation process.)

But there also would be great risks involved, the main one being the fear of the evil unknown. Though the economic instabilities of the past 300 years appear to have resulted largely from the fractional reserve system, was it also responsible for the relatively breakneck growth over the same period? Moreover, the changeover from one system to the other would be extremely tricky, requiring vast quantities of central bank money-printing and debt buybacks. That would be a recipe for an extremely fraught period carrying immense risks of mismanagement. In truth, another full-blown financial crisis may have to take place before such a changeover could be made at the global level.

But the theoretical upsides are great, as are frustrations with the current system, and the idea has begun to gather momentum. In 2012, the International Monetary Fund published an influential research paper laying out the case for the proposed system, and in 2015 the Icelandic government commissioned a report on the prospect of undertaking the changes. In Switzerland, a law requiring a referendum to take place should 100,000 signatures be gathered has set the country on a course to possibly being first to undertake the great experiment. Strikingly, the revolution is being considered at both ends of the spectrum: Iceland has lately proved among the most financially adventurous players on the global economic scene, while Switzerland has long been one of the most conservative. Considering the risks involved, adoption in a smaller economy such as Iceland or Switzerland would be a useful test case from a global perspective. It would limit the cost of failure to the global economy while helping establish the best way of adopting the changes should the reforms actually work.

For banks, the prospect is of course nothing less than a nightmare scenario, especially coming on top of all of their existing woes. These have included not only increased regulation but also the threat from a disruptive new technology undercutting their basic model in the form of Bitcoin, the new electronic currency that emerged almost exactly as the financial crisis struck. While Bitcoin has suffered its own wild fluctuations in the eight years since its birth, the technology that underpins it, Blockchain, has truly historic potential. The architects appear to have created an electronic system in which both parties in a transaction can act with confidence without the need for an intermediary, though there is some added risk for the payer, since reversing transactions is more difficult than in traditional banking. The world’s banks therefore face both the prospect of losing their money-creation privileges, as well as a potential usurper threatening their long-established role as the middleman through which all capital must flow. As 2015 fades into 2016, it is hard to think of a time in the past 300 years when the banker’s position in society has been more at risk.

The International Banking System Faces an Existential Threat is republished on the ProphecyandNews.com blog with permission of Stratfor.

Russia and the West Collide

On By AdminIn Russia, STRATFORLeave a comment

This article is part of a series authored by STRATFOR – a geopolitical intelligence firm that provides strategic analysis and forecasting. For other articles by STRATFOR click here.

Summary

Since its emergence as an organized state, Russia has collided with the West. For over a millennium, the two have clashed economically, politically and militarily, using the countries that form the buffer between them as a staging ground for their rivalry.

With Ukraine’s Euromaidan uprising and Russia’s subsequent annexation of Crimea in March 2014, the long-standing conflict has been renewed. But just as the end of the Cold War did not resolve hostilities between Russia and the West, neither will a resolution to the Ukrainian crisis erase the fundamental imperatives that have pitted the two against each other for more than a thousand years.

Analysis

The Russia-West divide began when the kingdom of Kievan Rus, the Slavic precursor to the modern Russian state, arose in Eastern Europe in the ninth century. With territory stretching from the Baltic Sea to the Black Sea, Kievan Rus was one of medieval Europe’s largest states. Toward the end of the 10th century, the kingdom adopted Orthodox Christianity as its official religion, opening a rift between itself and its Catholic neighbors in Western Europe and laying the groundwork for future contention between East and West.

A few centuries later, the Mongols invaded and destroyed Kievan Rus, and the state’s center of power shifted from Kiev to Moscow. The city became the heart of the Grand Duchy of Muscovy, a rising Orthodox and Slavic power that amassed its strength and territory during the 14th and 15th centuries. Meanwhile, Kiev (and much of modern-day Ukraine) became part of Catholic Poland and Lithuania, forging a lasting bond with the West.

The Rise of the Russian State

The Grand Duchy of Muscovy continued to expand and transform, first into the Tsardom of Russia in the 16th century and then into the Russian Empire by the early 18th century. Few geographic barriers stood between it and mainland Europe except vast and empty plains. And so, the empire extended its borders westward, vying with Poland, Sweden and Austria for territory in Eastern and Central Europe. By the start of the 19th century, Russia had become as powerful as many of Europe’s strongest states.

But the lack of geographic barriers surrounding it also made the Russian Empire vulnerable. It needed to create space between itself and other formidable powers, and it did so by spreading its influence in the territories on its periphery. The empire gradually and systematically took control of Siberia, the Caucasus and Central Asia. This brought the Russians into both contact and conflict with Muslim and Asiatic powers such as the Ottomans and Persians, as well as the European powers that held substantial sway in those territories, giving rise to great-power rivalries like the Great Game. As Russia evolved, so did its rivalry with Europe.

Then, at the start of the 20th century, something changed. The United States emerged on the international stage as a new global power, and the dynamics of the Russia-Europe conflict shifted. For the first time, a power that was not of the region played a significant role in its politics, first in World War I and then again in World War II. The competition between Russia and the West became an international one whose significance extended well beyond its geographic borders.

By the end of World War II, Russia’s influence on the Continent had spread farther than ever, reaching as far west as Berlin. In response, the West formed a new strategy to halt the Soviet Union’s spread: containment. Spearheaded by the United States, the strategy applied not only to Russia’s presence in Europe but also to its activities around the globe. The competition took on global proportions during the Cold War, with its participants divided into two diametrically opposed political and military blocs: the Warsaw Pact and NATO.

The Past 25 Years: A Rivalry Revived

Although the collapse of the Soviet Union in the early 1990s marked the end of the Cold War, it did not signal an end to the broader dispute between Russia and the West. At first, though, all evidence seemed to point to the contrary: Talk arose of incorporating Russia into Europe and the Western alliance, and it even appeared to be feasible. Moscow had lost its Eurasian empire, and the new Russian Federation had embraced democracy and capitalism, at least initially.

But the transition proved so chaotic and painful for Russia that, within a decade, the state began to recentralize power as Boris Yeltsin left the presidency and Vladimir Putin assumed it. The 1990s, celebrated by the United States and Western Europe as a golden age of Russian economic growth and democracy, were lamented by Russian leaders and much of the public as a catastrophe.

In its weakened state, Russia no longer needed to be actively and overtly contained by the West, and tensions between the two tapered off temporarily. However, the geopolitical imperative underpinning the United States’ containment policy — blocking the rise of regional hegemons on the Eurasian landmass that could challenge the Western alliance structure — never disappeared. Thus, NATO and the European Union continued to expand. Meanwhile, Russia recovered and Putin consolidated his power. The Kremlin worked to regain its position in the former Soviet periphery. On a rising tide of high energy prices and political stability, Russia began to re-emerge as a regional power.

Russia’s resurgence reignited the conflict between it and the West. The two fought for the allegiance of states in the former Soviet periphery, most clearly in the 2008 Russo-Georgian War, when Russia invaded Georgia after it and Ukraine attempted to join the Western alliance structure, particularly NATO. The European Union responded by launching the Eastern Partnership program in 2009, with the goal of strengthening economic and political ties with former Soviet states. In 2010, Russia countered with its own integration program, the Customs Union.

The rival blocs sought to attract countries in the Eurasian borderlands, perhaps the most contested of which was Ukraine. When, in November 2013, Kiev refused to sign an EU association agreement, the cornerstone of the Eastern Partnership program, protests erupted that ultimately transformed into the Euromaidan revolution of 2014. The situation quickly deteriorated, as Russia annexed Crimea and lent its support to the pro-Russia rebellion in Ukraine’s east.

Since then, hostilities between Russia and the West have intensified, reaching levels not seen since the Cold War. With a proxy conflict in Ukraine, Western sanctions and Russian countersanctions, and military buildups on both sides, it is clear that the Russia-West confrontation has once again come to a head.

The Next 25 Years: Same Conflict, Different Shape

Less clear is the shape that the Russia-West confrontation will take in the coming years. The geopolitical imperatives that form the conflict’s foundations will remain intact, as will the cultural differences that have spurred their competition in the Eurasian borderlands. But many changes are on the horizon as well, some of which could shift the balance of power in the West’s favor.

One such change is the massive demographic shift that is underway in Russia, Europe and the former Soviet periphery. By 2050, U.N. demographic projections expect Russia’s population to decline from 143 million to 129 million, a loss of nearly 10 percent. The West, by comparison, has a more favorable outlook: The United States’ population will grow by over 20 percent, from 322 million to 389 million, while Europe’s largest countries will end up somewhere in between Russia and the United States over the same period. Germany’s population will shrink by 7 percent, from 81 million to 75 million; France’s population will grow by 11 percent, from 64 million to 71 million; and the United Kingdom’s population will rise by 15 percent, from 65 million to 75 million. Each of these trends will shape the economic and military standing of their respective countries over the next 25 years.

Consequently, Russia’s ability to challenge the West by projecting its economic and military power will likely decline in the coming decades. Of course, demographic growth does not directly equate to the projection of power, and the West (particularly Europe) will experience challenges stemming from immigration and high non-European birth rates. Still, Russia’s relatively steep demographic plunge can be expected to undermine its ability to influence its former Soviet neighbors. This will only become truer with each year that passes since the Soviet Union’s collapse, as the social and cultural bonds that tie Russia to its periphery continue to weaken.

This is not to say Russia’s influence in the Eurasian borderlands will evaporate completely. Russia has been the dominant foreign power in the region for centuries, and its position has withstood serious challenges and periods of dramatic upheaval. Thus, Moscow’s primary challenge in the next 25 years will be to figure out how to maintain its advantage in the former Soviet periphery as its resources decline and the cultural and political ties underpinning its position erode.

The West will likely face its own challenges in the years ahead. A shift toward greater regionalization is already underway in Europe, and it will likely intensify in the next 25 years as groupings of states with shared political and cultural characteristics overtake the Cold War-era institutions of the European Union and, to a lesser extent, NATO. This does not mean the two will collapse entirely. Instead, they will likely be reshaped into more practical and sustainable forms. Nor will it necessarily lead to a power vacuum in Europe that Russia could exploit. In fact, it may allow some European countries to better deter Russian aggression. Nevertheless, the format and manner in which the West can challenge Moscow will almost certainly change.

These are the broad strokes that together start to shape the Eurasian borderlands’ future. Though other factors, including technological developments and the emergence of new political ideologies, will no doubt shape the Russia-West confrontation as well, by nature they are more difficult to predict. In this series, Stratfor will explore how the rivalry between Russia and the West has played out in Ukraine, Eastern Europe, the Caucasus and Central Asia prior to and since the collapse of the Soviet Union. We will then forecast how it is likely to change in each region over the next 25 years — a period that is poised to be just as dynamic, as both sides prepare for the sweeping changes ahead.

Lead Analyst: Eugene Chausovsky