Eve Blau
Hello and good afternoon and welcome. My name is Eve Blau. I am the faculty director of the Davis Center for Russian and Eurasian Studies, and we're very glad that you've joined us for this inaugural session of a new year-long Davis Center series, which is entitled, as you know, "Russia: in Search of a New Paradigm, Conversations with Yevgenia Albats." And we're very excited to be hosting this series here at the Davis Center because of the extraordinary and distinguished host and also the guests whom she has invited. So it's going to be an extraordinary and interesting series.
So in this series, which will be actually on Tuesdays from five to seven in this room, and the series was conceived and is being directed by the veteran journalist and political scientist, Dr. Yevgenia Albats, who will talk with scholars, military experts, prominent journalists among others, about the most pressing issues and questions facing Russia and the region and indeed the world today. And some of those questions which Yevgenia Albats has identified are, for instance, why did Russia evolve into an aggressive militaristic power? Where has Putin found the resources to run the war despite massive economic sanctions imposed by the West? What did economists get wrong about Russia's economic capacities? Will the Russian Federation survive in its current form and size, or will it fall apart? And is there any chance for Russia to return to the road of democratic development?
So today, we have the privilege and pleasure of hosting Professor Stephen Kotkin. He is a senior fellow at the Hoover Institution and Freeman Spogli Institute for International Studies at Stanford University, and he is also the John P. Birkelund Professor of History and International Affairs Emeritus at Princeton University. Now, today, Professor Kotkin will discuss “Russia: Back to the USSR or Back to the Tsarist Empire?” He'll be discussing that with our series host and also with you, our audience. And so I invite you to participate actively in these discussions. They will be recorded and posted on the Davis Center YouTube channel.
So I want to keep these remarks brief, so I'm going to pass things on to the next speaker. I'm turning it over to Dmitry Gorenburg, who is a Davis Center associate and senior research scientist at the Center for Naval Analysis. And he will provide more formal and informative introductions for our two panelists. Thank you.
Dmitry Gorenburg
Right, well thanks, welcome everyone. It's great to see such a good turnout here. So I have a slightly more extensive introduction for our host and our speaker. So Yevgenia Albats, who I think many of you know, is a Russian investigative journalist, political scientist and author and a radio host. Since 2007, she has been first the political editor and then the editor-in-chief and CEO of "The New Times," a Russian-language, independent political weekly. It was originally based in Moscow. In 2004, Yevgenia started hosting "Absolute Albats," a talk show on Ekho Moskvy which was, at the time, the last remaining liberal radio station in Russia. She was an Alfred Friendly Press Fellow assigned to the Chicago Tribune way back in 1990, and a Nieman Fellow at Harvard University in 1993, which I think is when we first met. She graduated from Moscow State University in 1980 and received her PhD in political science from Harvard in 2004. She's been a member of the International Consortium of Investigative Journalists since its founding in 1996. She's taught at Yale, at Moscow's Higher School of Economics, And she taught there until 2011, when her courses were canceled at the request of top Kremlin officials. In 2017, she was chosen as an inaugural fellow at Kelly's Writers House and Perry House at the University of Pennsylvania. She's taught recently in 2019, 2020 at the University of Michigan in Ann Arbor. And she was a senior scholar here at the Davis Center from 2019 through 2021. And then has returned this year to host this speaker series. She was also a Shorenstein Fellow at Harvard last year. And finally, she's the author of four books, including one on the history of the Russian Political Police, the KGB, who's alumni are running the country today. So that's Yevgenia.
Steven Kotkin is a Kleinheinz-if I’m pronouncing that correctly-Senior Fellow at the Hoover Institution at Stanford University and the founding director of the Hoover History Lab. He's also the Birkelund Professor of History and International Affairs Emeritus at Princeton, where he taught for 33 years and directed the Princeton Institute for International and Regional Studies and served as vice dean of what was then called the Woodrow Wilson School for Public and International Affairs. His current book project is "Stalin: Totalitarian Superpower, 1941-1990s."
So before I turn things over to Dr. Albats, I just wanted to give a quick plug for the next couple events in the series. On Tuesday, September 24th, Dr. Albats will be in conversation with economists Oleg Itskhoki and Sergey Guriyev about the Russian economy, two and a half years into the war against Ukraine. And then on Tuesday, October 8th, Dr. Albats will be in conversation with myself and with Alexandra Golds on Putin's military might: bluff and reality. So without any further ado, I'm gonna turn it over to Dr. Albats and Dr. Kotkin and thanks.
Yevgenia Albats
Thank you very much. As I already, you know, said, you know, my name is Yevgenia Albats, and first of foremost, I'd like to thank the Davis Center of Harvard for giving space and resources for this series of seminars under this title, "Russia: in Search of a New Paradigm." I'm grateful to Professor Eve Blau, the faculty director and Cris Martin, the interior executive director, and the entire team for their effort to make this happen. As for the format of this discussion, I will ask Professor Kotkin questions, which I prepared, and then I will turn the mic to the floor.
Please be mindful of the theme of the seminar. We're not talking about Ukraine. Harvard has a great Ukrainian research institute with tons of events. I attend many of them and advise each and every one of you to attend them to. This is a very, very interesting event. However, we're not going to talk about Ukraine here. We're going to talk about Russia, its present, its past, its present, and of course its future.
Thank you very much to all of you for coming. I should confess that I spent the last two years with Professor Kotkin, yes, with you, especially with this book. Of course, you know, at first I listened and read this book, his first book on Stalin devoted, predominant to Stalin and Georgia, the first years of him as a revolutionary. And then the second book, which totally consumed me, I listen to it each and every day. And this is the most profound and detailed study of the Soviet monster state and of the rules of the current regime in Russia. I read almost, it is a work of a genius, it's a fact, it's not a compliment. I read almost everything on Stalin, including those done by Russian historians like Aliac Klernok, Nikita Petrov, and Dave Wadley, advised him to read Nikita Petrov's book on Ezhov, it is one of the best study of the Stalin's purchase of 1936 to 1938 and the system of repression, which was set up back then.
However, this book is the first that from my perspective, gave an answer to explain why Stalin went for the whole scale purchase. Why did he, after investing much of effort in the civilization, which finally started to bring fruit, why he turned, he started putting in jails and killing Red directors and economists and professors and Kaganovich in charge of the heavy industry, which these produce impacted the industry. Why did Stalin do this despite he knew that the war was coming? he was preparing for the war, however he went for that. And Professor Kotkin can give ample evidence that there was his fear of Leon Trotsky and the book which was coming out, which was about to come out in France, which was titled "The Revolution Betrayed", what is the Soviet Union and where is it going? And thus, Stalin chose to hunt Trotsky in place of development. He was willing to sacrifice preparations for the war he knew was coming to his feud with Trotsky spread nationwide in the military, in heavy industry first and foremost. Self-preservation took precedents over rationality.
I cannot help to see the similarities between Stalin and Putin in that respect. What rationale prompted Putin to put himself against the western world? Russian Federation reached unseen prosperity by 2013, never before in the history of Russia. Whether the Tsarist Empire or the Soviet one did Russians live as well as they did from 2008 to 2012. Not just in the capitals, but also in the rural areas. Its economic growth was over 3.4% annually, the energy prices were skyrocketing, and the western world opened its capital and technological markets to Russia. And its much present. However, the annexation of Crimea in 2014, followed by invasion of Russian troops in Eastern European, which basically started the war in Ukraine, brought all that prosperity to an end. Ruble collapsed at the end of 2014, along with people savings and welfare. And the economic crisis characterized the following years. Thus came in February 24th, 2022, and Russia's whole scale invasion of Ukraine.
So professor Kotkin, why Putin chose to destroy whatever was achieved by him and his regime before 2014? What was his rationale or his fears? Who played the role of Lev Trotsky to Putin and his entourage?
Stephen Kotkin
Yes. First of all, thank you for the honor of the invitation to be here. Even though I live down the block, I'm not often invited to speak here. So it's a great honor for me today.
I think we need to be careful in putting Putin and Stalin in the same sentence. Stalin is responsible along with Lenin for about 20 million deaths, and whatever one thinks of Putin, he's not in that category. Stalin is in the category with Hitler and with Mao, and that's the whole category there is. Nobody else in that category. Putin is in a different category, but the similarity is that Putin is sitting in the Kremlin in the same building where Stalin's office was. Putin has a different office, but it's the same building. It's that 18th century imperial Senate built under Catherine the Great by the famous Pavlovsk architect. And that's where the Soviet government was. Gorbachev had his office there, Brezhnev had his office there, Khrushchev had his office there, and Stalin had his office there, and now Putin has his office there. So there's something about managing Russian power in the world that is a real challenge for anybody who assigns themselves that task.
Even though I'm very cautious not to allow Putin and Stalin to be placed side by side. I don't think Putin is going to be responsible for that number of deaths. And that doesn't mean that crimes that he's committed are unimportant. That doesn't mean that he's not evil or however you want to characterize him. Well, if we think about what happened the last 30, 40 years, what happened? Your life, my life, the life of many people here in this audience lived through it, had aspirations or expectations of certain outcomes, and now here we are again. So there are kind of three main explanations that we have for what happened.
One explanation is the perennial, it's America's fault, it's the West's fault. The sort of anti-Americanism, anti-Westernism of the left is available for explaining everything. And anything, in this case, it's about NATO expansion. It's about promises that supposedly were made that NATO wouldn't expand. It's about the failure to give them a Marshall plan despite the $50 billion that was transferred to Russia in the eighties and nineties, which of course disappeared, beginning under Gorbachev when call paid for the peaceful unification and all that money was stolen inside Russia. But there's this substantial group that wants to explain it as America's fault. If America had had a Marshall plan, if it had treated Russia better, if it hadn't expanded NATO, if it had understood this historic moment, then we would've had a better outcome. Now the problem with that explanation is that we've seen this outcome before. Autocratic Russia that overinvests in the secret police and overinvests in the military and threatens his neighbors is not something that's unprecedented. So attributing that to NATO expansion is hard because that phenomenon predates NATO. It predates the existence of the United States. This is a Russia that I recognize. This is a pattern that we've seen before. And I don't think NATO expansion or America's policy is responsible.
Yevgenia Albats
You mean the time of Catherine the Great?
Stephen Kotkin
All the way back to Catherine, all under the Tsars, the Soviet period, the Stalin period that I'm writing about. And now there's a Putin version, the versions are different. They're not identical, there are really important differences as I was alluding to contrasting Stalin and Putin. But there is a historic pattern here of autocratic regime, which suppresses consumption on the backs of the people, builds an overly militarized, overly police society that threatens its neighbors. So that preexists the expansion of NATO, and in my view, therefore the expansion of NATO or American policy is not gonna explain. That doesn't mean that American policy was a good idea, or American policy was excellent, or that I support everything that American and the West did. It just means that that's not the predominant explanation.
So then the second explanation, which is no longer very popular, the first one is still popular, the second one is sort of fallen out of favor. And that's, it's Putin, it's him personally. We had Boris Yeltsin, we had another option. We had Russia democratizing. We had it on a trajectory of pro-Westernism. But then this random character from the KGB somehow entered into the picture and cut that off and pushed Russia back onto another path. And if it had been somebody else, if Yeltsin had chosen Borís Nemtsov, who unfortunately, as you know, was murdered not far from Putin's office, if someone else, besides Nemtsov, anybody else had come to power, maybe we would've had a different outcome. So it's really Putin- personal, capricious, whimsical, his personality, his KGB past, all the things that you write about.
That explanation was popular until recently when people started to see that it wasn't only Putin in the war in Ukraine, that Russian elites seemed to fall in line. Not everyone, but many of them. The Russian people didn't seem on Moscow to oppose the war. Yes, many did and suffered for it, and many are in exile or in prison as a result. But it's hard to say that this is one person alone. It's also hard to say that any of the alternatives would've been different once they're in power. Because Putin wasn't today's Putin when he first came to power. It's also hard to understand how if they had been different, they would've survived. Just because you come to power doesn't mean you survive in power. You can come to power by accident. But surviving in power for decade after decade is not an accident. And so this, the second explanation, it's Putin or predominantly Putin, I don't think holds water.
So then we get to the third explanation, which is the one that is probably the dominant one now, which is that this is just Russian culture, Russian civilization, Russian DNA, this is just who they are and what they do. They're always autocratic, they're always militarized. And so there was this brief interlude when they imploded, the Soviet regime imploded. There was a dissolution of the Soviet Union. There was a little bit of uncertainty, but it came back again to how it is because it's mother's milk, it's passed on through the breast to next generation. This explanation that it's kind of Russian civilization, Russian imperialism, Russian DNA, very popular in Baltic countries, very popular in Poland, of course, very popular in Ukraine, very popular on television, very popular at Harvard and other distinguished places. And you can see why it's popular. Because there were these aspirations in the late eighties and nineties for a different Russia, and here we go again, that famous quote from Viktor Chernomyrdin about how we wanted it to be better but it turned out the same as always, right? Okay.
And so where do I come in on these three explanations? I've already said that I don't think it's predominantly the western policy, although western policy needs to be discussed. I don't think it's predominantly an individual, an accidental individual. And I don't think it's genetic. I don't think it's something which is going to be forever. If you had been alive in France sometime between the 12th century and the 18th century, you would've come up with a theory that France was gonna be an absolute monarchy forever. That there was something genetic about France. It wasn't always the same dynasty, but nonetheless, there was a certain pattern in French history, which of course was broken and it's not like that anymore. If you had been alive in England in the Tudor-Stuart period, you would've thought divine right of kings, this absolutism is forever. We're never gonna get out of this. The kings die, the kings are overthrown, there are palace coups, and yet we still have the system. But of course that's gone now too.
So I don't believe that there's a genetic code, and we have to be careful just because we're living through things and they last a long time to attribute it to culture, civilization, mother's milk or DNA. So I came up with this view, which is that it's a geopolitical conundrum that Russia attempts. It fancies itself a providential power under God. It wants to be a power of the first rank. It has this aspiration which is widespread, not just among the elites, but in the populace. It thinks it has a special mission in the world. And its aspirations exceed its capacities, meaning it is not the strongest power in the world. It doesn't have the capabilities to be this providential power under God to have a special mission in the world. It falls short. And then the gap between its aspirations and its capabilities grows over time.
And so it comes up with this solution to try to handle this geopolitical conundrum, the gulf between its aspirations and its capabilities. It comes up with this idea that you can use the state and use state power to force modernize the country to try to push it into the ranks of the first powers coercive. And it does this and sometimes has a spurt, it has an industrialization spurt, like you referred to under Stalin, or that we saw under Putin. We saw it on the Czars regime. It goes back to Peter the Great, as you know. And so they have this spurt and then they hit a wall, they stagnate, it doesn't continue. And instead of catching up to the first rank powers, instead of catching up which is what is now the western powers, the gulf between Russia and the greatest powers only gets wider instead of shrinking. So they try to use the state to manage this. They try to have this coercive modernization. Different forms, again, the Stalin one is much bloodier, incomparable to either the czars or the post-Soviet. And it turns out that they don't build a strong state. Instead they build a personalist regime. And there's a conflation between the survival of the Russian state and the survival of this regime that is trying to force modernize, to try to catch up, to try to match the capabilities with the aspirations. And you end up with personalist rule, you end up with a stagnating economy, and you end up with this conflation where the survival of the regime is somehow meant to mean the survival of Russia.
And today we have this Putin equals Russia equation, which is false, but very widespread. And so if they gave up the aspiration to be a providential power, a power under God, if they gave up the need to have a special mission in the world, to be in the first ranks of the great powers, then they wouldn't feel this geopolitical urgency to try to catch up somehow or close that gap or manage that gap between capabilities and aspirations. And then they wouldn't have to force modernize with coercion, they wouldn't have to suppress consumption and lower living standards to overinvest in the state and in the secret police. And they wouldn't have these moments of quest for a strong state that devolves into personalist rule potentially. So it's a choice. It's a choice that elites in Russia make again and again and again. It's not cultural DNA, although it does come from a self-identity, self-conception about, you know, Russia's special place in the world. And so I call this the geopolitical conundrum, and I think it can be broken.
In the case of Germany and Japan, it was broken by absolute destruction in the world war and then occupation, including the firebombing of German cities and the bombing and atomic bombing of Japanese cities. You had- this aspiration was ashes. It became ashes in those countries. In the case of the French and the British, wasn't quite the same way it was broken. And you can argue that it wasn't fully broken in those cases, this aspiration. The French have an aspiration to have a special role in the world, even though they don't have the capabilities, but they have rule of law and institutions and they don't threaten their neighbors. And the British, similarly. The Chinese, the Russians and the Americans are the ones which retain this aspiration.
In the case of the Americans, the capabilities have been closer to the aspirations, although people think they're slipping now. In the case of the Chinese, they've been building the capabilities, although they're still very far from what you might consider. And in the case of the Russians, the capabilities are much less than the aspirations ever were. And Russia is farther from Europe, it's cut off from Europe, that was a decision that Putin made. And so there's this crazy, it seems non-strategic strategy of imposing austerity on the population in the name of being a special country in the world that they can't actually achieve. And every time they've tried to achieve it, it's either collapsed in a heap or brought a terrible pain and costs, not just to its neighbors, but to its own people. And so they're caught in a trap, as it were. It's a trap about who they think they are and what they should be. And it's something that may one day be broken, but unfortunately we're still living with it.
Anyway, that's my view. So again, western policy we can critique. Putin's role is significant, and there is something cultural, even to my version of the geopolitical explanation, but I think it's fundamentally a geopolitical conundrum and a choice by Russia, at least that they don't have to make, but they continue to make that choice. And it continues to impose these horrible costs on their neighbors and on the Russian people as well. And on themselves, on the elites.
Yevgenia Albats
Did I get you right that even though, you know, I hate to try to get in the head of Putin, obviously none of us can do this, but your logic is the following: that Putin thought that he was going to conquer here, the rest of Ukraine subdued, and the West was going to yell and impose some sanctions, but then like it happened 2008 with Georgia, or like it happened, you know, after annexation of Crimea in 2014, the West is going to say, okay, you know, what can we do? You know, he's a bad guy, but after all, you know, his mind, he has this mind, and he do this because he can. Is that rationale that was driving Putin?
Stephen Kotkin
Yeah, I'm not going to be able to talk very persuasively about what he thinks.
Yevgenia Albats
Right, of course.
Stephen Kotkin
I have a decent feel now for what Stalin thought.
Yevgenia Albats
Let's talk about incentives.
Stephen Kotkin
I never met Stalin, I never met him, but I now feel like I understand him a little bit. That doesn't mean I approve of what he did, that doesn't mean I identify with what he did, but I have a kind of empathy, not a sympathy, but an empathy for his thinking. And if you put yourself in Stalin's mindset, I now understand some of the decisions he made. He made a lot of mistakes, as he got older, he got much less cautious, much bigger gambler, right through the Korean War stuff, where he was old and infer. But in his heyday, he clearly had a strategic mind. And I've come to understand it a little bit because I've been given access to his materials the way many people in this room have studied those same materials.
With Putin, it's a little bit different. We have his public speeches where he does say quite a lot, and you should pay close attention to what he says. These things are not consistent. There are changes in his public speeches over time. We have the testimony of those who are in meetings with him, private meetings, some who have fallen out of favor and have not been in a meeting with him in a long time, but others who have been in a meeting more recently. And so that's really important. So we have some information about his thinking, but we have to be cautious about his thinking because the regime is still in power. We don't have table talks and we don't have his personal archive, et cetera.
Okay, so let's talk about his evolution a little bit. So he comes to power, as you know, in Moscow. Not on a trajectory that was foreseen. The Soviet Union implodes, he's in East Germany. He has no idea, like anybody at the time could have had an idea about what this means and where it's going and what's happening. And all these gigantic processes, his life is undone. And, and so of course he's completely disoriented by this. There's some instinct, but he ends up back in his native city, the great city of St. Petersburg, fishing around for what to do. He ends up on the team of Anatoli Sobchak, a person you knew well, who becomes the mayor of St. Petersburg and is a high personality, late Soviet, early post-Soviet high personality politician with high profile and a lot of charisma. And Putin attaches himself to Sobchak, and it's in a way a rescue of Putin's career.
What's he gonna do with it? Where's he gonna go with it? Who really is Putin? He's not a major functionary in the Russian system post ‘91, he's an assistant to the mayor of the second city of the country. Putin gets lucky, Sobchak loses his effort at reelection. So Putin is thrown out of work. Instead of remaining with Sobchak, Putin manages through connections to go to Moscow. He's brought there by a group of people who were originally from St. Petersburg. So this little St. Petersburg mafia, as you know well, he ends up in Moscow. Pavel Barine and others who are really important inside the regime, give him these responsible positions. He's running the Kremlin's anti-corruption unit and the presidential administration, which is a great career move. Certainly had I been in that system, that would've been the job I would've sought to enhance my career.
And then he gets lucky a second time because Boris Yeltsin is sick, he's deathly ill. He drinks, he's got a heart problem, he is got other ailments, and he is unable to cope with the situation. If Yeltsin had been young and vigorous, we can argue this about Andropov, we can argue this about Kulikov, whom Gorbachev replaced in Moscow. So there are these accidental moments that you can't predict or control. Sobchak loses the election, Putin is fishing around for the next career move, his friends bring him to St. Petersburg from St. Petersburg to Moscow. Gets to Moscow and Boris Yeltsin is sick and it's a really big problem. What are you gonna do? All these people who've won in the transition, they're the victors of the transition, the beneficiaries of the collapse of the Soviet Union, they're concerned about their positions, their property, everything that they've acquired illegally or legally. Although that really wasn't much of a distinction in the 1990s.
And so here's this guy who's quiet, he seems confident, he's been given a few positions that he's managed more or less to deal with. He's got a loyalty streak that they appreciate, and they alight unto him. And it's just bizarre. You know, I remember talking to Berezovski, Boris Berezovski, the deceased oligarch at his club in Moscow, and I talked to Barine about this as well. And there are just all these random people that are thrown up by the process of Soviet implosion, and Barine is responsible for giving them the apartments in Moscow. So he knows them all. His office is controlling the property. So give one apartment to this one, give one to that one. This one gets seven rooms, this one gets two rooms. And so that there's this crazy random process going on. The churn, this post-Soviet churn. And Putin ends up at the top of this process. It's just stunning.
Sure, there are, as you know, 700,000 or so members of the KGB still around after 1991. Very big organization, a lot of it concentrated in Russia, the ethnic Russians and the Slavs generally dominated the KGB. So you have 7,000 judges and you have 700,000, yeah, KGB personnel more or less. And so there's a lot of people like Putin, he's not alone. And in fact they're coming into the Yeltsin's regime in really big numbers, very early on, the early part of the nineties. You've written a book about these people, I don't have to tell you. And so he's one of those many, many, many people.
But again, there's randomness of how he got there is one thing. But the fact that he stays, he manages to hold power, not just to get into power, that's really the what we need to explain. And so what he does is he rebuilds a centralized Russian state. It's phenomenal what he achieves, right? He destroys the power of the regional governors who are effectively war lords. It's kind of like the Chinese in the interwar period. You have these war- They don't have private armies at the same degree, but they control their ministry of interior personnel in their provinces. Then you have these people who've been able to privatize the hydrocarbon sector, which throws off all the revenue. So the oil and gas crowd, they have just tremendous power, more power than the state. You have the private TV stations, Berezovski TV station who doesn't own it, but he controls it. Several other private TV stations.
And so you have this power that's dispersed, and Putin manages to recentralize power in the Kremlin during this period. It just, it's breathtaking that a guy who doesn't seem to be very important, doesn't seem to be very accomplished, is a low level member of the KGB in East Germany, not even in a capitalist country. And yet here he is doing all this. The thing that happened that gave me an insight into that Putin was a really effective, serious person. Again, I'm not identifying with his values or approving what he does was when he grabbed, he took back Gazprom, the gas monopoly that had been the Soviet-era gas ministry and then got privatized and was just ripped. It was the largest company in terms of revenue in the country, and all the money was being stolen. And what Putin did was this guy Viakhirev, who was his, nothing, he's my size, very unimpressive, had been a functionary in the gas ministry, he got to the top because Chernomyrdin became Prime Minister, and so handed it over to his flunky and Putin calls Viakhirev in.
And Viakhirev doesn't suspect, it's kind of like when Beria got arrested. Viakhirev doesn't suspect what's going on, because Putin has lulled him into a false sense of security. And they have him now in the room and he is not leaving the room until he signs over all the property back to the state, including the hidden Shell game subsidiaries that they've formed to hide all the property and put in the names of their daughters and their son-in-laws and their uncles. And so the entire monster Gazprom comes back into state hands through this KGB operation that Putin has pulled off on Viakhirev and Viakhirev's comms and it's just stunning.
So Putin can't go in front of a crowd and win them over like Boris Yeltsin could. He doesn't have any retail politics whatsoever, but he's got this very cunning modus operandi of lulling people into thinking they're okay, that they're gonna be fine, that he likes them, that they're gonna work for him, and then stripping them down to nothing. Or in the case of ProGo, having them get all on the plane together for the first time ever, the whole ProGo team gets on a plane for the first time ever and that plane goes up in smoke. So the clearly he had lulled them into some idea that they were gonna survive and be important and play some role, and there was some mission for them. And so all these, Putkin and the rest of them, they get on the plane together. And so that's Putin, and you can see it with the Viakhirev repossession of Gazprom in the nineties. So that's the path he sets off on. And the interesting part of this path is the methods versus the goals.
So you can support the recreation of a centralized Russian state. You are patriotic, you see that the governors are basically criminals in what they're doing. You see that the oligarchs are acting like criminals in what they're doing. You see that there's lawlessness in the land. You seen that the state power has dissolved. You see that Russia is in trouble. And so you could support Putin's reconstitution of a centralized Russian state. But the trick is the methods he's using. He's stealing back the property. So it's not through a court of law where they have a case and they repossess it, right? It's just, they call him in, they say, "How do you like your fingernails?" And, and then they get the property back, right? That's, or they say, "By the way, we have these photos of your daughter on holiday and she's so beautiful. Look at how beautiful your daughter is. Man, it would be a shame if anything happened to such a beauty like her. And by the way, that television station, we're gonna take it back now. And if you don't sign the paperwork, we don't know what might happen." And so those are the methods of reconstituting the Russian state.
So if you're a Russian patriot, you now have this dilemma. You support potentially, I'm not saying everybody, but potentially you could support Putin in rebuilding a Russian state that can survive and eliminate the criminality that's widespread. And remember, there are murders everywhere in the street, right? Berezovski's bodyguard is blown up and Berezovski escapes, but many people don't escape. And so the methods don't seem to be justifiable, even if you support the goal. And so that's the dilemma that opens up.
And then he has the first term, which you'll hear more about when you actually have real scholars up here for the next version of this, I see Oleg sitting in the audience there, about the economic side, but he actually does privatize the land, which was a really massive problem and really important for Russia's economic development. People think it was oil, but it wasn't oil. During his first term as president, the average oil price was $30 a barrel, and it was $70 a barrel during his second term. So it's not oil, it's the fact that fixed the tax system to a certain extent, he partially de regularized, he privatized the land. There were actual liberal reforms in the economy with the recentralized re-operating state. And so this first term, but then of course the arrests of the oligarchs, the arrests of some of the governors, the threats, the murders or disappearances, right? So this is the Putin that we have. And now he's got a centralized state again and the economy is doing well, growing at 7% a year, more or less. We don't wanna exaggerate, but it's a pretty good boom.
But now he's got this Russian power problem, what's Russia's place in the world gonna be? What's Russia's relationship gonna be to Europe? And what's Russia's relationship gonna be to America? And is Russia gonna be a great power again? And is Russia gonna be a providential power, a special power under God with a special mission in the world? And this is the dilemma that we begin to see. Where the elites are now on their feet again, the country's kind of off its knees through these Putinesque KGB methods, but what's its role in the world and where it's gonna go?
And here you have the complexity of Western Russian interaction, but also with Japan and South Korea. Putin is desperately trying to do a deal with Japan over those Korea islands, what Japan calls the Northern Territories in the early and mid two thousands. He's desperate to get a deal where he's ready to give up two of the islands to Japan of the four, or have some type of joint control in exchange for massive Japanese investment. And the Japanese just refuse to consider anything other than a return of all four islands before they will do the deal and reinvest in Russia. So Putin hits a wall with the Japanese. He has tremendous success in Korea. He hasn't been to South Korea since 2013, but actually he fixes the relationships to South and he abandons North Korea. It might seem crazy now because he was recently in North Korea and the South Korean stuff has gone, but there's this moment where he is trying to figure out how do I get the Western money, the Western technology, the Western investment at scale. And it's not just West geographically, it's West in terms of the first iron chain in East Asia, Japan, and South Korea. He wants to bet the farm, not on China, not on Iran, not on North Korea, but on the rich and powerful countries with the technology, but provided Russia is recognized as a special country.
But they don't wanna recognize Russia as a special country. 'Cause Russia is just now a defeated in the Cold War power with a tiny economy. And so Russia's view of the world is kind of like the UN. Everybody's a member, everybody's sovereign, but five countries have a veto. And Russia is one of those five countries with a veto. So we're all sovereign, but Russia, we're more sovereign than others because we have the veto at the UN. So that's the world they want, and that's the world that they inherited from the victory in the second World War with the sacrifices. But that's not the world anymore after 1991. So the West and Russia can't figure out how to be themselves in this new post-1991 world. Like what is right? Is it just another country? Can it join Europe? You know, like France? Even the UK joined Europe for a while, right? Can it do that?
But the Russians say, "We're not Poland. We're never going to be Poland where we're just another country that belongs to some organization called the EU where every member is the same and nobody has a veto." And so the Putin regime smacks up against this problem that it cannot be special. It can only be another country like Poland or like France if it wants to be a partner with the West, with Japan and South Korea.
And I remember this in real time, Putin's aide who was writing the memos for the negotiations over the Korea islands with Japan asked me the history of that. And so I gave a lecture on bibliography to Putin's top eight who was running this Japanese negotiation. They were very, Putin was very sincere. And so when you have people like Chubais, Anatoly Chubais, a colleague you know well, who says that Putin changed. That it was a different Putin in the early 2000s compared to now. I would agree with that up to a point. But the problem was, is the change was precipitated by managing Russian power in the world, by sitting in that Kremlin building where Stalin also had an office. The Imperial Senate, Catherine the Great. Yeltsin's office was only briefly there because they refurbished it and they redid the Catherine the Great interior, and Yeltsin got pushed into Building 14, I remember that well. But anyway, so he hits up against the impossibility of Russia being the kind of Russia that he and his colleagues imagine Russia should be. Like at the UN with the veto. So not joining the EU, but a condominium with the United States to run Europe, like it was in a Cold War. But that wasn't an offer, and no western leader was going to give that. And Putin had to relinquish that, or he couldn't gain the access to the Western investment technology.
So there was this divergence then, where the West would not allow Russia again to be what it was during the Cold War. And where Russia would not accept its diminished status. And neither side figured out a modus operandi that would work there. And then of course we have the Georgia, the war over Georgia, the Crimea, Ukraine, and all the things that you mentioned, which we could talk about. But I wanted to explain the run up to that and how we got to that problem. So Putin calls George W. Bush on 9/11. He's the first one to call the White House. Condoleezza Rice was the one who picked up the phone, and she's now my boss and co-teacher at Stanford University. And my friend in the Kremlin, who was... I had known in Nova Bisk from the Sociology Institute when he had a two-bedroom with two kids and a wife, and made his way into the Moscow regime and grew up to the top and was in the presidential administration. He called me the same day and he said to me, you know, "We're calling and we're having a problem getting our message through." And I told my colleague, who was a colleague at the New York Times, that this was going on in real time, and he actually wrote a column about this, strangely enough, based on this conversation, it was Bill Keller.
But anyway, so Putin calls and they're very happy in Washington. Putin wants to cooperate with the response to that 9/11 terrorist attack. And it's very important that Russia cooperate because of Afghanistan, Russia doesn't have a complete veto power over basis in Uzbekistan or Kyrgyzstan, but does have a say in those things. And plus Russia's airspace is necessary for this. So they come to an agreement and they want to go farther. They want to rebuild the relationship, and they think they have this historic opportunity, anti-terrorism. But Putin's ask is a free hand in the former Soviet territories. His ask is a Russian sphere of influence in Georgia, Ukraine, central Asia, everything but the Baltic states. And the Bush administration thinks, "We can't do that. You know, we can't compromise the sovereignty of these other countries, this is not Munich in 1938." We may make a lot of mistakes. The Bush administration, again, I'm not justifying Western policy, we all have our opinions, but the problem is, is no American president can say, "Sure, do what you want in your neighboring countries." You have a veto like at the UN over their sovereignty in reality. And so Putin is shocked. He says, "But I'm giving you the access to the bases, I'm giving you the Russian airspace, I'm letting you fly your military equipment over my country, and you won't allow me to have a sphere of influence in these trashganistans that Stalin used to control?" And he's livid, he's absolutely livid. And then lo and behold, these places begin to have democratic uprisings.
Not only won't the Bush people allow Putin to run these places as the Kremlin sees fit, but they start to want to get rid of their own autocratic regimes. And of course, Putin being the kind of person that you know better than I do from that paranoia, KGB training and life experience, suspects that this is not a democratic uprising by people expressing their preferences. This is some CIA instigated flock here and there, color revolution, et cetera. And so that's it, he's now done with that. And he makes, you know, we have this armed revolution in Ukraine, which was a real uprising by the Ukrainian society against their own autocratic regime and a criminal corruption and fraudulent election. Gave that speech in Munich in 2007 at the security conference where Putin says, "We're not gonna take it anymore. That's it." And people think that was weird. What does he mean? Well, he meant it. And then we saw the stuff over Georgia where he provoked that ignoramus feeling into attacking first, and then he had a pretext to go and attack.
And then the White House is calling, "Don't go to Tbilisi, right?" Putin's troops are in Gori, if you know the geography of Georgia, it's very close to Tbilisi, the Capitol. And there's no Georgian army in the way, because the Georgian army, which was American-trained, quit the battlefield. It just fled, it left its weapons on the battlefield, it left its dead on the battlefield. There was nothing in the way for Putin to take Tbilisi. And the rest of them say on the telephone to the Americans, "You don't understand. We hate Saakashvili and we're overthrowing his regime." And the Americans go back and forth with them, "Don't do this." Don't go to Tbilisi." And somehow, you know, like Truman in 1945 over Hokkaido, talk Stalin into not invading the Japan home islands, I still go, I've written that section, I still don't know how Truman convinced Stalin, but anyway, Russia refrains from taking the Georgian Capital. But nonetheless, they break off the two separatist regions of Abkhazia and Ossetia. They're still now a separated from Georgia and there's subversion of the rest of Georgia. And Georgia is falling into that orbit that the Bush administration refused to grant Putin.
But he himself is trying to do this and Ukraine falls into that category as well, the Crimea episode. So what's Putin thinking? Does he perceive that the West is weak? That the Americans won't respond? That the Germans are dependent on gas, that Biden fled Afghanistan in the middle of the night and is not a serious guy? And maybe he's thinking that. Again, I haven't had lunch with Putin in a very long time. But it was set up for this divergence between Russia's understanding of its role in the world and what western partners, including the Germans, not just the Americans, were willing to accept as Russia's.
So the clash was there, and of course the vulnerability was Georgia and Ukraine because they were outside the NATO umbrella. And Putin has subverted countries inside the NATO umbrella with cyber warfare and sabotage, but not with kinetic war, right? So he's observed that NATO line, but where NATO didn't stretch, those places were vulnerable and we were not ready. He was not bluffing and we were bluffing and we were not ready for that. And so now this is the problem, the tragedy that we have today, but it's one that didn't happen overnight. It's one that's not Putin alone, but it's one that I believe is deeply rooted in a grand strategy, a vision of the world, and identity of what Russia's rightful place is in the world, even if it doesn't have the capabilities to match it.
That was 45 minutes longer than it should have been. At least.
Yevgenia Albats
I'll give you an example to support. Now one of the close friends of Putin is Yuri Kovalchuk. Head of bank Russia who turned into billionaire after Putin became the president. And who is Putin's closest confidant. So he has an office on a street in Moscow.
Stephen Kotkin
Yes.
Yevgenia Albats
I don't know whether you ever been to this office, however, you know, or I was told about the office firsthand that there is a sort of, you know, prayer office, the size of the half of the soccer field. And along the perimeter of this office, there are flags of each and every country of world. So when you enter this office, you're like anti-United Nations. If anyone one of you went to the United Nation in New York, you know there are halls where, you know, all flags of all kinds. So that's exactly what sits in Yuri Kovalchuk's office. That's how obviously, you know, that's his environment and he's one of the closest confidants of Putin. Okay.
Stephen Kotkin
Do you know that they have a vision of Russia's place in the world in Russian power? A lot of analysts made the mistake that they were just enriching themselves. They were just stealing and they just wanted to get rich.
Yevgenia Albats
And sure it was an institutional culture.
Stephen Kotkin
And they had no ideology, no conception. But I think that's only part of the story because for them, they're patriots. They think they're defending mother Russia against the sabotage and subversion of the West, against the color revolutions. Now in defending mother Russia, they deserve to enrich themselves because they're performing this patriotic duty.
Yevgenia Albats
Nothing comes for free, right?
Stephen Kotkin
Right. No. So they deserve the oil companies and the gas companies and the gold mines and the big offices and with the- It's just because they're doing God's work to defend mother Russia in the world today. So if you watch these Kremlin ceremonies where somebody gets a medal, they have tears in their eyes. They're crying. They're crying out of this sentimentality, out of this sentimental patriotism. They really do have an ideology, they really have a belief that Russia has this special mission, has a place in the world, and that they are the chosen ones to advance, to defend Russia and to advance Russia's role in the world. And so, sure, they've stolen a lot of stuff, but after all, if they hadn't stolen it, the Democrats might have stolen it and been the fifth column to do the West's bidding inside dismembered Russia, and where would we be today?
Yevgenia Albats
I would argue about ideology, but let's move on.
Stephen Kotkin
Okay.
Yevgenia Albats
Angela Merkel, a long time Chancellor of Germany.
Stephen Kotkin
Yes.
Yevgenia Albats
Is now blamed by many for the European dependence on Russian energy resources, gas trusted foremost, which in turn boosted Putin's resources used to rebuild the Soviet milk, industrial, coal mines. Merkel always failed to asked to me, as one of us, because she grew up in Eastern Germany, so she knew these American state in a way Eastern Germany was worse than the region of the Soviet Union where I lived. Because of the control and because of, you know, they had this double building, there were sons and daughters of Nazis. And the same times there were disloyal by definition because they were looking over the wall to the West. So Merkel for you, what were you experiencing? That was my feeling.
Stephen Kotkin
Okay.
Yevgenia Albats
So, and she knew that she was dealing with a KGB man who brought his KGB cabal into power. And by 2008 there was this Putin seven already happened. So however, she argued that she chose to trade with Russia assuming a rational response from Putin that trade is mutually beneficial, that this trade will enrich. Putin and his cronies will bring a lot of money. At the same time, of course it was very beneficial to Germany, because Germany became the biggest supply of tubes and heavy machinery tool to Russia. So and Merkel, I spoke with her, you know, in June of 2023 the last time, and she believed that that was very important because trade was something opposite to the war.
Stephen Kotkin
Yes.
Yevgenia Albats
That there was no rationale for Putin and his people to go into war.
Stephen Kotkin
Yes.
Yevgenia Albats
Precisely, because they were benefit- Trade was so beneficial to them. From your perspective, what was wrong with Merkel's analysis?
Stephen Kotkin
She wasn't a gangster. If she had been a gangster, she would've understood the mentality in the Kremlin. So Mutti, as we call her, Angela Merkel is known as Mutti, her memoir I think is now out, I haven't read it yet. She disappeared for a while to write her memoirs. As Marshal Pétain said, the guy Michi France, as Marshal Pétain said, when they asked him, "Marshal, why didn't you write your memoirs?" He said, "Write memoirs? I have nothing to hide." So now we'll see Angela Merkel's memoirs.
So again, Putin, people think, oh, we'll put economic sanctions on him and we'll cause him economic pain. We'll shave two points off his GDP. And so Putin lost the private automobile industry in Russia. The sanctions destroyed the private automobile industry. It was gonna eventually be displaced by the Chinese anyway, but Russians buy more cars now from China, they don't have a domestic automobile industry to speak of anymore because of the sanctions. And you know what Putin's response to that is? Okay. I guess so, I lost my private automobile industry. And, you know, he's not a private equity mogul. He doesn't care if you shave two points off his GDP. Because he can enforce austerity, he can suppress consumption at home if necessary. He cares about cash flow. Authoritarian regimes need cash flow, not GDP growth. This is a really important distinction. GDP growth is something you need if, for example, people have a choice in their election when they go to the Poles, if elections are free and fair. If they can throw you out, then GDP growth is really important.
But if you have a choiceless election, if the election is a fraud, a sham election and the GDP growth goes down, well, that's why you have police, which crunches. You have police with crunches in case GDP growth goes down. Yeah, but if cash flow goes down, then big trouble. Because you need the cash flow to pay off the elites. You know, that pulled coop, that paying off of the elites, and the elites is very expensive, right? The wife, the second wife, the third wife, the mistress, the dacha, the gun collection, it is just a fortune what these guys cost. And so you need cash flow. Fortunately the cash just gushes out of the ground. It's just like tap, tap, tap, it's just gushing cash. And then you have these people who have the same accent in Germany that you have. Because you worked in East Germany and she was born and grew up in East Germany. They speak the same German accent, Merkel and Putin. And you have these people buying that gushing out of the ground cash flow. And so you're taking that cash flow into your pocket.
You don't need to have foreign bank accounts abroad. Putin doesn't have any foreign bank accounts abroad, because the whole Russian economy is his bank account. And when he needs to divert any money, by the way, if he had a foreign bank account, it would be a message to the elite that he didn't think he was going to stay forever. It would be a message of weakness if he opened a foreign bank account.
Yevgenia Albats
He used to have them until 2008.
Stephen Kotkin
I don't believe he had any money abroad.
Yevgenia Albats
I can give you all the documents.
Stephen Kotkin
Having been publish that I know. But having been with our friends in Virginia over this problem, we may disagree on this. Luka had Rapha in bank accounts and Putin was smart. He had the minuscule amount of money for a vacation holiday abroad. He's got the whole Russian economy, 'cause it's this cash flow. And so is the gas industry profitable? Doesn't care, because he's got the cash flow to siphon off from the gas industry, and from the oil industry, and from the diamond mines, and from the gold mines, and from the cybercrime. So he has got massive cash flow. Whatever happens to the GDP, he's happy if the GDP grows, but if it doesn't grow, he's okay. He's got the trenches. And so Merkel doesn't understand any of this because she's not a gangster.
And so for her, if your GDP is growing and your people are living better, they're going to reelect you. You're going to be popular, you are going to go down in the history books as a leader who made Germans prosperous. And if you can do it with Russian gas supply of Russian energy and have a German domestic industrial boom fed by Russian energy and have higher standard of living in Germany and be popular, how could that not be good? And Putin must think the same way. When you go to a spy school, I've never been, I've just read about it. When you go to spy school, the first day, when teach you the following, confirmation bias, where you believe what you want to believe, that's also known as academia. The second thing they teach you is mirroring, where you think a certain way and you mirror the other person's thinking to be like you're thinking.
Oh, mutually beneficial trade? It's great for me, it's got to be great for them and they have to think this way. Which is true unless you're a gangster on the other side, or unless you're not a private equity mogul. I remember in the nineties when they told me, they said, "Oh, you know, they'll never default. It'll ruin their credit." And I said, "Yeah, it will." You know, it'll ruin their credit. And you know what? They don't care. You care. You are worried about your credit. And I said, those Russian bonds that you own, you can now wallpaper your office with them. That's what you own, you own wallpaper because they don't care. They don't think like you think is mirroring that Merkel and others did. It was a genuine belief that trade would make both sides better off.
By the way, that's what is in the textbook written by Paul Samuelson, I heard that in school. I didn't have necessarily Paul Samuelson as my teacher, but I remember econ 101, right? And it works except if the other people have different values, different goals, a different system, a different mentality, which they had. And so Merkel ran up against something that she didn't understand. And she admitted this after the fact, right? When she went to Putin to speak to him and figure out what, could they do a deal? Could they come to an understanding, could they prevent war? And she came back and said, you know, he's just like from another world. And I said, duh, yeah, that's right. Because of this mirroring problem of first day spy school. She didn't go to spy school either. Even though she grew up in East Germany and everyone was in there, you said they had whatever, 25 million people and they had 40 million people in. Yeah, so she made a mistake that was not hers alone. The entire German establishment bought into that point of view. Some of them did really well as a result of that. Some got reelected, some made fortunes, some ended up on the board of Gazprom. Right? And so it very lucrative.
And also if you believed in it, you thought you were doing good, right? You were not just making money, but you were doing good. You were making Russia better too. You were giving Russia a better future. But again, the problem was you have to break this mentality where Russia is not just another country like Germany or Poland or France. Russia needs veto power like at the UN. Russia needs a special place, a special mission in the world. And until something happens with that, you're gonna have to manage somehow. And now you've incentivized spoliation, right? The more Russia is not part of the international system, the more it doesn't care if things blow up, if the undersea cables are cut.
Well, you force us out of the banking system, so we don't need the banking system. And Putin says to them, "I can't bank, nobody can bank. I'll just cut the cables, how's about that for fun?" The only thing that keeps him from cutting all the undersea cables is the Chinese bank. The Chinese use the banking system. If the Chinese manage to become self-reliant outside the American financial order, nobody needs those undersea cables except us. Yeah, that's right. I can't bank, nobody can bank. So if you don't figure out with Russia how to share the planet, you know, some modus, that if you incentivize them only to spoliation to Ukraine or more Ukraines or Ukraine forever, you then have to face this again and again, potentially. And you can wait around till Boris Yeltsin comes back again, or Gorbachev comes back again, right? The leader who comes back is pro-Western.
You know what the ratings are of the pro-Western leaders in Russia, historic ratings, they're single digits. You know who the popular figures are in Russian history with the highest ratings, that would be, for example, this one. And so the ones who stand up to the West are the ones who go into the history books who last in power and go into the history books. And the ones who don't stand up to the West but befriend the West and try to do deals with the West on the Western terms, are the ones who don't last in power and don't go into the history books. So it's an interesting strategy to wait for that to happen and to succeed as opposed to find a modus vivendi with the Russia that we have.
Yevgenia Albats
Would you expect Trump to do better than Merkel?
Stephen Kotkin
Yeah so, I'm gonna risk, way out of limb here, and say I cannot predict what Trump might do. Trump is an unpredictable person, and he is very contrary. I have, my office is two doors down from HR McMaster at the Hoover Institution. He was the national security advisor to President Trump and just wrote a book about it. It's quite a good book. McMaster's book is about trying to be loyal to a president who was elected rather than decide that you have a better policy or that the president is a threat, even though you were not elected in the president's. So I asked HR, I said, what is it about Trump? Tell me, I mean, you were there in the room with him all the time. What's the deal with Trump? And so HR said to me, contrarian. Yeah, contrarian. You tell him that Obama did this, Trump says, "All right, we're doing the opposite," even if Obama didn't do it. And so with Trump, it's possible that he's gonna surprise us. Remember, he was supposedly pro-Russian, he was supposedly a Russian agent. He was supposedly enamored of Putin and his sanctions were more severe,, much more severe than the Obama sanctions vis-a-vis Russia. The weapons that went to Ukraine. Trump compared to Obama, right? So one has to be careful in making predictions based upon one's image or one's expectations of who these people might be. So I'd make no predictions, I'm not political, I don't belong to either party. This American politics is not my thing. Only on April 15th every year do I become an expert on American politics.
Yevgenia Albats
Okay, time and again, you mentioned Russian elites.
Stephen Kotkin
Yes.
Yevgenia Albats
And-
Stephen Kotkin
I'm sitting next to one.
Yevgenia Albats
And whether we're talking about rationalism and Apple ads, or without, whether at light with the background in the KGB or without, they were busy stealing their wealth and stashing it in Europe, during the last 25 years in Europe. In Europe and the United States
Stephen Kotkin
Yes.
Yevgenia Albats
They were investing money in the education of their offsprings, putting them in the best American and British universities.
Stephen Kotkin
Yes.
Yevgenia Albats
They worked hard not just stealing nation's wealth, but they were creating their life after the retirement. They had this strategy of life after 65.
Stephen Kotkin
Yes.
Yevgenia Albats
They prepared their villas all across Europe, and departments on Manhattan, on the Upper East Side, and their kids were supposed to run companies in the West.
Stephen Kotkin
Yes.
Yevgenia Albats
All of a sudden, for many of them, on February 24th, 2022, all that came to enact. They never expected this to happen. They lost their yachts and everything, and can you imagine? You go to your mistress and you cannot buy a new Chanel or whatever on the way to, you know, it's a disaster.
Stephen Kotkin
Yes.
Yevgenia Albats
So why, from your perspective, why they don't resist? Why they no one is trying to sleep, which is true. Why they, you know, why Putin? And the reason I'm asking you this question, because in one of your interviews you said that Putin's success is very much based on his business model, that he create a social mobility for the underclass.
Stephen Kotkin
Yes.
Yevgenia Albats
By paying huge money compared to their monthly salaries in the provinces to become, can afford it.
Stephen Kotkin
Yes.
Yevgenia Albats
And at the same time, by giving businesses inside Russia, access to the abandoned Western businesses, and they can help them for free. Not that they can run McDonald, we know they can't, they already failed.
Stephen Kotkin
Yes
Yevgenia Albats
Not that they can run Starbucks, we know they already failed.
Stephen Kotkin
Yes.
Yevgenia Albats
But still. However, I think, don't you think that there is a contradiction between your hypothesis of Putin's grade business model that allowed him to put, to keep, you know, control over Russian region powerful as well as under class?
Stephen Kotkin
Yes.
Yevgenia Albats
And at the same time that these rich and powerful lost their, you know, whatever they prepared as a strategy of their life after retirement.
Stephen Kotkin
Yes, nobody wanted to lose what they lost. Can you imagine if you asked the Harvard faculty, well, if America could beat China in a war, the price will be, you lose your house in Nantucket. The Harvard faculty would be unanimous against the war. Well, some have not Nantucket, but Martha's Vineyard, I don't want- I don't wanna underplay the Harvard faculty. So nobody did this on purpose. Nobody was eager to lose the villas in southern France or in Spain to lose their yachts, to lose the boarding schools in Switzerland, to lose the spots in Oxbridge. If they had been asked, they would've said, "No way." But of course they were not asked, nobody asked them. It just happened, as we say in English .
The snow just fell onto their heads out of nowhere, just showing you that my English is better than you thought. So it happened. And then what? What do you do? Now that it's happened you have a couple of choices. You can protest. And if you have any employees back in Moscow, any family back in Moscow, what's gonna happen to them? You're gonna say the war is a criminal act. And then you have 10,000 employees in Russia.
Yevgenia Albats
Wallace did it, you know the owner of the others?
Stephen Kotkin
- Yes, he did, and so far he's alive. So far, he's alive. I wouldn't wanna have his need for security. So once it happens, then they have to decide what to do. And most of them decide that it's wait it out. See what happens. You know how people in these regimes, they try to keep their head down, maybe it get better, maybe get reversed. I don't know what side's gonna win. I don't wanna be on the losing side, I'll just be quiet. Then when they see that it's not going away, that it's becoming the new reality, then they have to decide, okay, we're gonna make peace with it. And what happens is all of the property that's owned by the Westerners who flee, either because they're sanctioned or because it's politically incorrect to be owning a business in Russia, making money in Russia, they'll leave and they can't take their property out.
So this property is available for redistribution. So the war hands Putin, because of Western sanctions and because of Western cancellation of Russians, it hands Putin a gigantic property asset class of all these fantastic businesses that he can redistribute to the elites. So he begins to make new millionaires, and in a few cases, new billionaires from the war. And people are like, you know, this war, it's not so bad. It turned out that, sure, you know, I'm half Ukrainian and my wife is Ukrainian, and I was born in Mariupol, and it was all blown up and destroyed, and I wouldn't have wanted that to happen, and I'm sorry that that happened, but I own all the Starbucks in Moscow, and the province is a Russian now. What do you know?
And so there is a compromise with the new reality and an enrichment by the war, partly because of Western sanctions, Putin is able to consolidate power among the elites who otherwise could have been broken off from him if the West had a different policy, driving a wedge between Putin and the elites. That's one thing, and then in the provincial area where, you know Russia provinces, you traveled in the Russia provinces. In the Soviet Times, you traveled to the republics and the provinces of the Russian Republic before it was fashionable to do so. I did the same, not as a citizen, obviously. You know that their standard of living is much, much lower. Many fewer jobs, a lot fewer opportunities. They can't make it to universities in the big cities. Not even Novosibirsk or Sevastopol, Yekaterinburg, let alone Moscow of St. Petersburg.
And lo and behold, the war brings what? It brings recruitment into the army at seven times the national wage. And then nine and now 11, because they have to continue to recruit and they have fewer people to recruit from. So all of a sudden you have seven, nine, eleven times more wage than you had before. Not only that, you probably didn't have a job before. So not only is your wage nine or 11 times higher than the national average, but you actually have a wage now as opposed to before. Yes, you are at risk of dying, and many of you and your friends and from the same villages will die. But your family gets a $90,000 balloon payment, which is a lifetime of money in the provinces. And though the family buys a new house, it buys a gotcha, it buys a car, one of those Chinese cars. And so the family has lost one of its sons, sometimes more than one, but again, it has become enriched. Would the family wanna make that trade again? Probably not, they would prefer to have the son. They would prefer to have the son have a job that doesn't go off to war, that pays the living wage, that the war wage pays. But again, this is the reality that's delivered to them.
And so Putin has consolidated his popularity through the war by enlarging and enriching a bigger elite than before, and enriching provincials in ways that they never could have dreamed of. And so the irony of the war is that it's created a massive base of political support. That doesn't mean the war is popular. Again, the cemeteries are much bigger now than they were. We can see this from Google Earth, from other ways that you can just go online and look at the expansion of the cemeteries. It's tragic. It's tragic in Ukraine, of course, but it's tragic back in Russia. They're the perpetrators, but they're also dying. They're the cannon fodder as well. That doesn't excuse the atrocities, but nonetheless, it's tragic for them. But at the same time, there's a boom going on. How long will boom last? How high is the price for the boom? These are all issues for you to discuss with your economist superstars, not with me.
But now let's talk about resistance in the Kremlin. Let's imagine you've gained your market nothing. You are the deputy chief of the Presidential Administration, and I work for you. And we both know, because we're not stupid, that Russia's future is going down the drain. That Putin is destroying the future of Russia. The deaths, we don't know the exact number, but the number is really high. Many, many tens of thousands dead, more than a hundred thousand mortally wounded or seriously wounded to the point of invalid amputations. The economy is now militarized. The society is militarized. We cut off ourselves from the West completely. Rehabilitating Russia and Europe seems like an impossibility. Now we know the price that Russia's paying for mortgaging its future. We know the grand strategy is a cul-de-sac. We know that Putin and his cronies are corrupt. We know everything because we have information. We're on the inside. And I come to you Yevgenia and I say, Putin is destroying the country. We have to do something. You think the same thing.
But you know what? You think that Putin sent me to test your loyalty. And that this is a test, and that if you agree with me, you are gonna go to prison and maybe even be executed. Forget about losing your position as Deputy Chief of Presidential Administration. So you bang your hand on the table and you say, "Don't you ever talk to me like that." And then you run out of the room into the president's office and you tell him what I said. Every member of the Russian elite knows that if they talk about Putin to other members of the Russian elite, that those other members will run and snitch on them to save their own skin, because they'll perceive it as a provocation, as a test of their loyalty. You have a high barrier to collective action in a repressive, authoritarian regime. It's very hard, all coups fail until they succeed. And they succeed because you decide to join rather than to save your own skin.
So when Prigozhin is marching on Moscow he actually doesn't march. He stays in Rostov at the military base, just like Cornilev in 1917 didn't march, he sent his own purse. He didn't march, he stayed, he didn't go to the capitol. Prigozhin doesn't go, but you have about five, 6,000 heavily armed men marching on the capitol. They shoot down the airplanes. So you know they're heavily armed. You don't shoot down an airplane with a pistol or knock it out of the sky with a truck. And in Moscow, who's defending the Capitol? Zolotov, yes, the national, the riot police who don't have heavy weapons. That's all the regime has in the capitol, is riot police without heavy weapons. So Prigozhin is the page out of Mussolini march on Rome. You bluff the march, and then when you get to the capitol, there's no fighting, because everybody joins the coup while it's happening. So we're watching this march and the Russian military and secret police, they don't defend the regime. Nobody comes out and says they're going to fight. They're going to kill Prigozhin, they're going to defend who. That woman who took your place, the one who runs RT, what is her name? The Armenian name. Simarnya. Well, she's now the TV personality that we would prefer you to be in that country. Anyway, she says nothing during this entire episode. And afterwards she said, "Oh, you know, I went to the Dutch and I was offline." I didn't know, they were all cowards. They didn't defend the regime. The problem was nobody defected to Prigozhin. They didn't come out and say, "We join you. The war is a criminal act, we need to stop this. We join your mutiny against this behavior, this regime, whatever." So they don't join. Nobody defends, but nobody joins. So he calls off the march, because the march is about eliciting defections inside the elite. But who's going to defect? How about you go first? No, no, how about you go first. How about you announce that you're joining Prigozhin? How about you announce that? And of course, they're afraid for the same reason that everyone's afraid in that regime, the collective action problem. And so nobody joins.
But if they had joined, if someone had become courageous and defected, if several major units, especially the airborne, the elite airborne units had thrown their weight behind Prigozhin, the regime could have dissolved. Putin flees the Valday, you know, where he has those little kids with that cute little family. Lachi and Vanya. And I don't know if any of that's true. But anyway, he goes to Valday and then he is- And then, yeah. And then he, that's why I said Lachi. And then he's got to get out. Somehow he needs asylum, or there's a firefight to capture him, or whatever there might be. That was a distinct possibility. Everybody says, "Oh no, the whole thing never would've worked." Of course it didn't work because coups always fail until they work. And so there was a tipping moment there. But again, you have this collective action problem. Who's going to go first? Who's going to risk it?
And so they know that the trajectory they're on is the bad trajectory. They know that the gap with the west is widening. They know that becoming a vassal of China is not what they all dreamed about when they got into the Kremlin, or they got into those big companies, or they got into the embankment and Ministry of Defense, or they got into the Lubyanka or whatever, right? They didn't sell, "Let's go to Lubyanka the FSB headquarters so that we can become a vessel of China in 20 years." Right? That was not the plan, that's the trajectory. Many of them object to this trajectory. They thought it was a joke when they read Kin's novel. Yes, they thought it was a joke, but it's not a joke, it's their reality now. And so, but they're stuck again. You go first, you go first, right? So, and at the same time, not only are they stuck fearing for their lives lives, but they're richer now. They've enriched themselves as part of the war effort in many ca- Not in all cases.
Yevgenia Albats
Only they live in the golden cage. And we had this in Soviet times. Where I'm pushing the running out of time-
Stephen Kotkin
I wonder why. That's another mystery I can't answer.
Yevgenia Albats
- Questions, but I can't support in his article in foreign affairs, this May, he suggested five futures of Russia and six one he suggested in his talk at the New York Public Library. So I'm not going to go to that because it'll take us another hour and I get it, we have to do it in a double too. So I just advise you to read this article in the Foreign Affairs. It's very interesting, you know, the kind of options that Professor Port can suggest for Russia. But, you know, I'll ask you two quick questions if you don't mind.
Stephen Kotkin
I'll try.
Yevgenia Albats
One, will Putin go for the all-out war in Europe? Do you think, you know, many say that, you know, that Putin may agree to some negotiations and even concede some of the territories, but that's just in order to get a break to rebuild his weaponry and then to start this whole scale war in Europe? Would you expect Putin to go?
Stephen Kotkin
So I have no idea what he's gonna do. And in fact he doesn't either. There's improvisation going on here. This is what I do know. He has not attacked any NATO country that is supplying Ukraine. So as the weapons move from Germany to Poland or other places into Ukraine, he has not attacked them while they're on NATO defendant territory. So he's observing for the time being a red line of not attacking NATO kinetically. He'll try to sabotage the depot with a fire or whatever it might be, a covert operations, but no war against a NATO defended country so far. So that's interesting. I think that's an important fact that we have to take into consideration. As far as the rebuilding his military and coming again, he's done that, he's been rebuilding his military the whole time. The idea that if there's a peace he gets an opportunity to rebuild the military, that's rubbish. He's had the opportunity to rebuild the military and it's underway. He doesn't need a peace to do that, and...
Yevgenia Albats
I'm sorry, you are right that he's short of 5 million people precisely in the military industrial complex.
Stephen Kotkin
He doesn't have labor power.
Yevgenia Albats
Manpower, qualified workers to rebuild his MIC.
Stephen Kotkin
He doesn't have labor power.
Yevgenia Albats
Yeah.
Stephen Kotkin
He's got significant shortages, you'll hear from the economists in detail about that, so I'll just leave that aside. Nonetheless, he's managing to produce a significant multiple of the missiles now that he produced before. He's got the heavy drone production from the adapted Shahed or martyr drones from Iran. He's got dual use equipment coming in, not always directly from China, but via Kyrgyzstan, Kazakhstan, Turkey, massive trade flows that are not registered in China, Russia bilateral trade because they use cutouts. He can do this, this is Russia's model, as I was saying. They know how to do this. And so it may not last. He may make a mistake. He may run out of something really important.
The Chinese may change their policy, it doesn't look like it, but the Chinese are not dependent on Russia. Russia's dependent on China. Russia doesn't decide to be a vassal of China. China decides who its vessels are and it can change its mind. So things could change, but right now he's able to do this. He's able to rebuild even with the labor shortages, 30,000 a month, new military recruits, which is about the casualty rate he was taking. So he's got a one-to-one replacement. Ukraine's replacement is a tiny fraction of Russia's replacement rate of troops lost at the front. He knows that, we know that.
He doesn't need a pause to rebuild. He's rebuilt, he's got a lot of weapons he hasn't used yet. He's got an intact air force, he's got a lot more missiles. He's using the S-300 anti-aircraft as an offensive weapon. He can do covert operations, he can poison the water supply in Warsaw, no drinking water in Warsaw. Drive a million or so people, refugees, at the capital of a major European city. There's a lot of trips up his bag that he hasn't gone to yet if push comes to shove. He's got the waste ponds from the nuclear plant in Zaporizhzhia. He doesn't have to hit the nuclear plant, which is well defended, it's concrete with rebar. And if he hit it, we would be able to trace the missiles and he couldn't deny it. But he can blow up the waste ponds, which are wide open and send those, that nuclear waste from Zaporizhzhia sky high across all of Ukraine. People say he'll never do that because some of it will go over Russia. I said, yeah, some of it will go over Russia. He can do that. He's got the titanium oxide plant in Pericope. If they try to invade Crimea land, there's only one land bridge, Pericope. The had this problem try to invade Crimea. He's got titanium oxide, he blows up that chemical factory of titanium oxide. I wouldn't want to be within 500 kilometers of that explosion.
He's got a lot of tricks and tools up his bag short of attacking a NATO country with coming up against the greatest military alliance in recorded history. So I don't know what he's going to do, but that's not high on my list of things to worry about. I got a lot of other worries way before that. Now I don't live there. I don't live in Estonia, I don't live in Latvia, I don't live in Poland. Maybe I would think differently if I lived in those places. I live here in Cambridge, Massachusetts, in Palo Alto, California. I have an office in the ivory tower, actually it's a concrete tower, the Hooper tower.
So my life is different from those people on the front line. I'm not losing friends and relatives and my family members in atrocities in war. So for me it's an analytical problem, not a personal, I'm not an exile from my country, but I'm worried about a lot more things than an attack on NATO countries.
Yevgenia Albats
Would Putin use nuclear weapons?
Stephen Kotkin
He has them. This is the thing about nuclear weapons. You can go to the Kennedy School, we can walk over to the Kennedy School and we can have a seminar on all the reasons it would be dumb, self-defeating, if he were to use a nuclear weapon. And the amazing non-proliferation and nuclear weapons scholars there, they give you this reason it would be self-defeating, that reason it would be self-defeating. And I said at the seminar, and I say that's true, it would be self-defeating. But what if he does it? What's the plan? The problem with the nuclear weapons is he has them. He has them and they work.
Yevgenia Albats
And you have seals who are capable to find this Osama Bin Laden.
Stephen Kotkin
You know, it's right for the president of the United States to be concerned about the possible use of nuclear weapons violation. Again, all the arguments of why it would be self-defeating, very rational. But he has the capability. If you are sitting in the basement of the White House, they have the situation room with no windows, that's not a conversation you wanna be having. What's our response if he uses nuclear weapons? You don't wanna be talking about that because you know what the war plan is? He uses nukes, we use nukes. He nukes us, we nuke them, that's it. End of civilization, end of the plan. Do you wanna have that conversation?
So remember, the president of the United States has that conversation on behalf of the American people who elected that person, but also on behalf of 1.4 billion people in India, hundreds of million, 700 million plus people in Southeast Asia, who appointed the president of the United States to have that conversation for 8 billion people? Nobody did. And if you're president, that's a big burden to have. I mean, the war plan is a secret. The war plan is one of the most secret things we have. But I got to tell you, I figured it out.
They nuke us, we nuke them, that's the war plan. Or we nuke them, they nuke us. That's, you don't ever want to go near that. So the policy of the Biden administration has been to avoid a direct war with Russia, which is the heaviest armed nuclear power on the planet. I support that policy of avoiding a direct war with nuclear armed Russia. That is a policy I support. The second piece of the policy is aid Ukraine in its self defense against Russia's attack. I also support that policy to the fullest. And I've never waved from that policy either. It is very frustrating, nuclear blackmail. People hate it. And of course they say, "See? We crossed the red line and he didn't use the nukes." So he is bluffing. And I say, "Yes, he is bluffing." And then what if he's not walking the next time? What do you do? What's the answer?
And so I'm very concerned of the possibility that he could use them. Even though I know all the arguments of the great experts of how self-defeating it would be. You cannot ignore that. So it's right to be cautious in engagement till you see where you are. And he's observed red lines just as we've observed red lines. People say that he's indiscriminately killing everybody in Ukraine. And yes, there are a lot of atrocities, but the number of civilian deaths in Ukraine compared to Syria where Russia also committed atrocities, is much lower. This is not to say that what he's doing is okay, it's criminal, it's a criminal war, but it has not been an all out everything that he's got war. And so it could be that. And I don't want it to be that. At the same time, allow Ukraine to defend itself and try to extract a piece which is favorable to Ukraine, right? There's peace and then there's peace on your knees. Putin is offering peace on your knees. That's not an outcome I want to see.
I want to see a peace that Ukraine is a viable sovereign state. It can have whatever size military it wants, it can join any international organization that invited to join, it's a fully sovereign nation. That's the Ukraine I want to see. That's the peace I want to say. I don't want to see a peace out of needs, but I got this other problem and I don't know the answer, but I'm concerned about the answer. Now other people, again, they think it's just the bluff. God bless, I hope they're right.
Yevgenia Albats
Thank you, on October the 22nd, David Hoffman of the Washington Post wrote the lot on nuclear federation. He's going to give a talk here, going to talk about precisely about those issues of use of nuclear weapons and, you know, the possibilities of, you know, used by Russia, United States. So, and what that waste for the United States to control all Russian maneuvers for the nuclear weapons. Professor Kotkin, thank you so much. I promise we're going to give floor to the audience and I would like to keep my prompts, if you don't mind. Please introduce yourself and please try to make your question as short as possible as we're really running out time. I'm sorry, it's my fault. No, it's my fault because, you know...
Stephen Kotkin
You invited me so it is your fault, but it's my fault because of how long I speak.
Yevgenia Albats
Okay, Cris. Cris Martin, the interim director of the-
Cris Martin
Hi, I'm Cris Martin of the David Center. And I was really taken by your commentary about how you were getting into Stalin's- You felt like you could get sort of into his head because you had the opportunity to look through so much of his papers. And it made me wonder if you think in 50 years, a hundred years, there'll be a future historian who gets to go inside of Putin's head. He's a man that is said to be very obsessed with how he'd be seen historically. And I wonder how you think that is affecting sort of his record management and if the same kind of resources will be available to future historians on Putin as you have on Stalin.
Stephen Kotkin
A good question. Stalin preserved almost everything. His crimes, his atrocities, his paranoia, he preserved those documents on purpose. They would not have been preserved if he had said destroy them. So he kept them, not anticipating that people like myself or other scholars in the audience here would go look at them and write these books, which would make him, let's say come out differently from how he wanted to be perceived by posterity. So he preserved those documents. Putin knows that Stalin preserved those documents and what happened to Stalin as a result of preserve. So that's the first point I'll make. Second point I'll make is that we're in the electronic age and preservation and destruction of documents is just not the same. Stalin was a paper world, obviously. He read everything on paper and wrote on paper giving his instructions on paper, sometimes on the telephone. But a lot of his telephone conversations were transcribed, especially when they involved military affairs. And so we have a transcript of his phone conversations, not in all cases, but in many cases.
Not all documents from Stalin's era are still available. Some are still under lock and key, but an immense amount of self-incriminating documents. So Putin knows this. If I were Putin, and I'm not, and I don't think like him, but if I were him, I'd be wondering if it's a good idea to preserve those documents. Interestingly, because of electronic surveillance, the Kremlin inner circle went back to typewriters. Putin famously doesn't use the internet. I mean, he does the Zoom with his minions on occasion he'll have some members that- Ministers or have some other formal government posts and he'll din to speak with them on that screen, that Hollywood Square screen. And so he does use those electronics, but I don't know how much those are for show and those are real conversations. I don't know what he shares with them, if anything, about what he's up to. But for real inner circle stuff, it's typewriters to foil surveillance electronic eavesdropping. I don't know how well they're doing, because we seem to know quite a lot about how that regime works.
A lot of that comes from the second echelon people blabbing, they come out of the meeting and they go on their cell phone and they say, "Well, this is what we were just told to do." We don't know if they're telling the truth, we don't know if they know they're being eavesdropped, and so they're speaking disinformation. We're picking up a lot of stuff about the regime, but a lot of it is second echelon rather than first echelon. First echelon is narrower. The typewriter problem inside the Kremlin. Again, I don't have a security clearance, I don't work for the US government. I pick up a thing here or there and occasionally in conversation, including with the people in the presidential administration, who've read the Stalin book in Russian translation and have told me how much they admire it, because it's the truth of the Stalin history rather than the propaganda rubbish that they put out for the public consumption.
So we may not know, even if the regime falls as the Soviet regime fell, even if things open up, right? What Yevgenia Markovna was able to do in the nineties for example, when that regime fell and the documents opened up and all the KGB material and interviewing KGB figures and entering into Lubyanka and all sorts of things that nobody anticipated would ever be possible, right? She was there and skilled enough to take advantage of all of that in that narrow opening in Russian historical terms. It was a brief period, it was a long period for our lives, but a brief period of historical terms. And so she got in and got a record of a tremendous amount of stuff because they preserved those documents and there was that crazy dissolution of the regime, the implosion of the regime, dissolution of the country. So I'm not confident that that's going to happen again. That we'll have implosion, the regime will fall, all the documents will have been preserved. Those are a lot of variables for this to work again the next time. However, these regimes, they surprise you. They surprise you in preserving these things, because they don't think they're going to fall. They're very cocky, they're very arrogant, they're very posterity conscious. They think the documents show them in a light that we don't think they show them in.
Again, we shouldn't mirror. They have a certain interpretation of their great acts that we look at and say, "That's a criminal act." And they look at and said, you know, "I'm as good as Peter the Great," or whatever it might be. So on the one hand you would think, probably not. But on the other hand it's happened before, it could happen again and we could get lucky. But the electronic stuff preservation is a higher order problem that that is less likely.
Unknown
We have a question.
Yevgenia Albats
Yes, please.
Ben Bresse
Hi, I'm Ben Bresse, I am a student at the Kennedy School. You mentioned Russia's trajectory to be a Chinese Maxwell state. History however we've seen the Russian Chinese relationship, even when the Soviet Union and communist China should have been, they were ideologically aligned, they were never really politically or strategically aligned. Could you talk some more about Russia's current trajectory and how it's informed by the history of the Russian Chinese relationship?
Stephen Kotkin
That's a hard one, just, I'll give a short answer. Well, I'll by my standard is I'll give you short answer. Sorry, it's all true. So Russia is a European country, but it's not Western. It's European because that's a cultural category. Western is an institutional category, rule of law, separation of powers, free and open society, free and open media, et cetera. Russia's not Western, but it's European. Japan, for example, is not European, but it's Western as Western institutions. But it's not European at all in its culture. It pulled it in some aspects of European culture and science, the Dutch and et cetera. And Portuguese, they brought the tempura, which is delicious. But anyway, it's not European. So there's a ceiling on Russia-China that's cultural. Russia is not an East Asian country. It's not even an East Asian power. It's never been a power on the Pacific. It's failed to be a power on the Pacific for more than 300 years and it's going to continue to fail.
So there's a ceiling, but at the same time, that ceiling seems a lot higher than many of us imagined before the current situation we're in. The anti-Americanism, deep and fundamental, a binding glue to the relationship, the bromance between these two characters, both of whom have good doctors and may last a lot longer than the life expectancy in their countries because of better doctors. They might not, but they might. And also they've been, they know some history. They've been down this road before. The last time they let the Americans drive a wedge between the two of them it didn't work out so well for them. So they don't think that that's a good idea again this time around. Sometimes when things happen the first time you learn. I mean, in America we don't learn, but in other countries you learn, don't repeat that, right?
So Gorbachev happens in the Soviet Union and the Chinese figure out, oh no, no reform communism, no socialism with a human face. No political opening. Gorbachev happened. It's not going to happen with the Chinese Communist Party. And because of the Soviet split, which predates the Kissinger-Nixon thing. Kissinger-Nixon took advantage of the split that had happened and they didn't cause. You can't cause the split. You can only perceive it and take advantage. So they've been down that road, which makes it less likely they're going to want to go down that road again. So between the anti-Americanism, the bromance and the history, it's a higher ceiling. Although there is a ceiling. For China, Russia is a means to an end, not an end in itself. It's weak, the Chinese are contemptuous of weakness. It destroyed communism, the Chinese regime will never forgive for Russia for destroying communism in the Soviet Eastern block. Never ever forgive that.
And so there are some things which you would expect the Chinese to grow tired. The Chinese refuse any dependencies, right? So 20% sealing on Russian hydrocarbons to China, no power of Siberia two, right? The power of Siberia one is not even at capacity. They're never gonna build that second pipeline because it makes them too dependent on Russia potentially, right? 19% right up to that 20% margin on hydrocarbons getting from Russia. So it's very advantageous to have Russia in your back pocket as a battering ram, as a partner in your anti-Westernism as a backfill. In case you get blockaded from Middle Eastern oil, you can temporarily ramp up Russia deliveries or LNG deliveries from Russia even, right? Whether you have, if you don't have the pipeline capacity. So you can see that at some point it's possible that China says, "Our interests are elsewhere, not with Russia. Russia was important for a certain epoch and we've moved on," right? When Soviet Union fell in the nineties, the Soviet military industrial complex completely collapsed. Had no customer anymore. Soviet had no military. John Zain came and he said, "I'll buy it."
So the Chinese in the 1990s revived the Russian military industrial complex from death, was an amazing story. So Dong Xiaoping jilted the Soviet model and Soviet trade and partnered with Jimmy Carter in America in '79. And did the Japanese story of access to the American domestic market manufacturing for export FDI from Japan, Taiwan, funnel to Hong Kong an international financial center, which the Chinese otherwise didn't have. And export to the insatiable American domestic market and grow your own middle class through the American middle class appetite. And Dong did that, but John had this ace in the hole, take the Russian military industrial. So they started, they bought that junk aircraft carrier from Ukraine and they bought a lot of stuff from Ukraine besides that. But Russia was the main customer. But, you know, you can sell anything to China once. And after you sell it to them once, they start selling it on the world market. And it's a better version in many cases, not in all cases. Chinese avionics jet engines are still worse than Russian jet engines. They're still dependent on Russian jet engines. The avionics in Russia are bad, but somehow the Russian jet engines are better. The nuclear cycle, China building out its nuclear arsenal. Russia is a Walmart for a nuclear arsenal, right? Everything from the uranium enrichment, all the way to the waste management, Russia is better than anybody, better than the French, still better than the Chinese.
The Chinese will get there, but still they're depending on Russia temporarily. But eventually the Chinese military industrial complex doesn't need Russia anymore. It's built a nukes out, it's got its own domestic nuclear cycle like Ross Adam. And so you can see that point in the not so distant future. I can see it, let alone a guy your demographic can see that. So you can see that dependency of Russia on China is growing astronomically and the dependency of China on Russia is not growing, and if anything potentially diminishing based upon Chinese re-engineering and other things. So if I'm Russia, I'm afraid that they're not going to want me as a vessel, they're going to throw me to the curb at some point. If they reorient their grand strategy, if they develop the self-reliance in the tech that they're hoping to do, I think it's improbable, but I've been wrong about a lot of things. If China gets to the place they want to be, Russia's importance is highly diminished. And Russia has nowhere to go. Russia could always go back to Europe because there was Angela Merkel, there was Germany, and they'll take you back no matter how evil you are. And, you know, . But you can't get back to Europe now if you are Russia, you know why? Because Poland is in Europe now. And over my dead body is Russia coming back to Europe over Poland.
Poland will never- Russia could become democratic. Yevgenia Markovna could become president in Russia, and Poland will still say no on rehabilitation. And of course the Estonians, the Latvians, the Lithuanians are right behind the Poles. And it's not only the Poles, the Scandinavians are now on that bandwagon, but it's mostly the Poles. So Russia has no pathway back. Even if Germany said that they would do this again and they won't, not in the current conjunction, that's for sure. But even if Germany were agreed to Aus Politik once more, remember they got peaceful unification through Aus Politik. So the Germans got a lot from this. They then doubled down like morons on the Aus Politik with the gas, which they didn't have to do, that was gratuitous. But they got the unification peacefully. So you can argue that it worked big time for the Germans, not the gas stuff, but the previous stuff. But doubling down was a mistake on the gas. But so you can't get back to Europe if you're Russian anymore, 'cause the Poles are in the way, they're inside, they're in NATO, they're in the EU and they'll march on Moscow if Washington lets them, you know, the Poles. So where do you go if you are Russian? You've burned that European bridge to Smitherines and then you blame the Europeans for you burning it. And then you can't get back into Europe because who's in there now? And your vessels of China thing is going the wrong way for the long term.
And so, yeah, that's why they're having these conversations in the Kremlin, that Putin's grand strategy is ruining the country. He's mortgaged the future, it's a cul-de-sac. So I don't know what's gonna happen. And this China-Russia thing may last a really long time, much longer than I may last. But there are possibilities where it could get shaken up. And not in Russia's choosing. Again, you don't choose to be a vassal of China, that's their choice. So Russia doesn't have a lot of cards here. And if the context changes, Russia's cards could get worse.
Yevgenia Albats
Last question over there and we have to wrap it up.
Craig Kennedy
Hello, Craig Kennedy, from the center associate here at the David Center. And I wanted to circle back to the question that Yevgenia opened with, and that is, why did Putin decide with all that was potentially at risk to go into Ukraine in 2014? Oil was at $125, he just hosted a successful Olympics and he really seemed to have the wind in its back except that there was a trade deal that seemed to be slipping away from him. And I think the answer you gave was that he has this idea that is motivating him of a special status for Russia and Ukraine is part of that. And that that idea is so deeply ingrained in the Russian psyche that it is something that we now need to accept as pretty much set in stone and find a modus vivendi to work around it if you want to have peaceful world. So that's one thing I heard, but I also hear other things from you as well. You focus on cash flows and the importance of cash flows to maintaining the regime. This is very much in Henry Hale's model of politics.
Stephen Kotkin
Yes.
Craig Kennedy
These are ultimately rent seeking people. So before I came to the Davis Center, I spent 20 odd years in banking, and who's one of my clients actually I helped gas do their IPO in 1996. And I knew quite well.
Stephen Kotkin
And you're free and you're at liberty.
Craig Kennedy
I'm still at liberty, so I pay my taxes. But what anybody in gas bond senior management could tell you, when the new group guys came into power, everyone was nervous.
Stephen Kotkin
Yes.
Craig Kennedy
And lost his cash flows, but he had a comfortable retirement. But Putin wasn't going after gas pond to strengthen Russia, at least not primarily, gas bond was already paying a lion's share of its taxes to Russia and providing cheap gas domestically, yes, there was a lot of stealing going on, but it was simply to provide cash flows to his to help consolidate. So I come back to 2014 Ukraine again. And if you were a banker in Russia in 2010 talking to the Russian elite, one thing you heard consistently was, show me ideas about Ukraine. Show me things that are available there. We've all been told we need to go buy and acquire assets in Ukraine.
Stephen Kotkin
Yes.
Craig Kennedy
They knew that it was up for grabs, and they needed to have facts on the ground. Nobody was talking about Nobody was talking about the essay that Putin would write 10 years later to justify the facts of what was going on. So I'm wondering about this tension in your view because you said elsewhere that we need to follow Kennan's dictate of being patient long term strategy and standing up to the regime and not making concessions. So if we believe that this is really a cash flow driven, a gang, as it were, as opposed to a manifest destiny driven regime, you come to a different solution about how you manage the current policy. I'm wondering if you can talk about those two tensions and some of the things you said.
Stephen Kotkin
Yeah, so false binary, totally false binary. Conviction and self-interest when they align, that's called power. If what I believe gets me a job first at Princeton University and then at Stanford, I'm gonna believe it even more, right? So you can have conviction and cash flow and they can be both high priorities. And when they feed each other, that's when you get the power and that's when you get the success. And it's when people have principles that hurt their self-interest that you understand what kind of people they are. But the vast majority of people, okay, Harvard accepted, but in the outside world, the vast majority of people, their principles and their self-interests are often aligned.
And so people say the Koch brothers, they just want, they're against regulation because they just wanna grow rich from their chemical business. And I say, you know what? They actually believe in deregulation. That's a core conviction. It also happens to be beneficial to the bottom line, but it is a core conviction. So that's how this regime is. They have core convictions and it enriches them. And again, that's how they justify their enrichment because they're defending those core convictions. And as far as 2014, why did Putin throw everything away? Risk and risk this, again, mirroring. Did he think he was risking anything? Now in retrospect, it's clear how Germany behaved, and how the United States behaved, and how Ukraine decided to fight back. And in retrospect, all that's clear. But in prospect, was that the idea that he was risking everything and anything financially and economically by doing this? Or did he think that he would get Ukraine, which is of very high value for him, without paying the kind of price that he's been forced to pay so far? And by the way, that price may go down over time as he anticipates, or he may be wrong. I'm just saying that his calculus is not our calculus.
He wanted Ukraine, that's what this was about. And he thought he could take it. And so far he's been mostly wrong. And so far is not the fullness of time. So we'll see, we know Finland in 39, 40, but this is the core point that you have to take home here. This is the core point. From everything that I've said so far, we have to share the planet with Russia, just like we got to share the planet with China. We can't wish them away, you know, flush and they go. We can't install some pro-American person there who's going to last, who's going to endure in power like Pygmalion from George Bernard Shaw. You find them street urchin and you make them into a responsible stakeholder in the international system. So we have to live with them. So the issue is, what are the terms? What are the terms of us sharing the planet?
If the terms are conquest of Ukraine or ending Ukraine sovereignty, I don't like those terms. I don't want to settle for those terms. I think we can do better. If the terms are that Russia gets to participate in the international order, that Russia gets to participate in the international economy, I'm okay with those terms provided its reciprocity, provided its international law. My problem with all of that was not Russian, right? The corruption was in London. Russian corruption was in London. The bankers were in London, the lawyers were in London, the courts were in London, right? And Cyprus and Cayman Islands. And I could go on, that was Russian corruption. So that was the world we had before. And I didn't like that world either in some ways, even though it was beneficial to so many people, especially bankers, financiers, lawyers, fixers, shareholders. I would prefer a rule of law and reciprocity. So I've got to figure out how to share the planet with countries that are not going away, that have a different model from me. They're Eurasian land empires, they're a thousand, or in the Chinese case, more than a thousand years old. They have autocratic government, they have big land armies and fight land wars. They suppress consumption and other things that I could describe. And they're called Iran, and they're called Russia, and they're called China and they predate us.
And they don't think it's just that America, which just appeared on the planet recently is dictating the terms of how the world is organized. And they're gonna push back against that. And they're gonna push back against it in the vulnerable places. Crimea, Ukraine, Israel, South China Sea, Taiwan. And it's been clear as day for 30 plus years that those places were territorially vulnerable. And we've been out to lunch about that, and here it is now. But again, does that mean we blow the planet up? We end humanity? Does that mean that we capitulate and hand over Ukraine sovereignty? No on both of those questions.
So there's this place in between, appeasement and holocaust, nuclear holocaust. There's this place in between which is called deterrence plus diplomacy. And deterrence plus diplomacy means, they're scared of me, but I talk to them. I don't talk to them just to talk and I don't scare them just to scare them. I'm not a hawk and I'm not a dove. I'm a combination, I have deterrence and I have diplomacy. Because I want terms that are favorable to me and my friends. 'Cause I have to share the planet, but what are the terms of sharing the planet? You know, deterrence in diplomacy, I mean, it is not a new thing, we can do it. We've done it before, okay, our political class maybe has degraded, okay, maybe we're not in the best of shape, right?
This current moment, maybe we made some mistakes and we have a lot to answer for. Maybe we misjudged who these people are and what they're up to. Maybe they misjudged us and they misjudged our will and our capacities and our resilience and our corrective mechanisms and our bounce back and our alliances built on trust and relationships, not built on past. Maybe they underestimated us. Maybe it's not just that we made mistakes, but maybe they made mistakes. And maybe they're in trouble, and maybe we have to get on the front foot, and maybe we have to push back. Not just in the places where we're territorially vulnerable, but all sorts of other places where I see vulnerabilities with them. Maybe we can do this because we've done it before. And they're not 10 feet tall and we're not basket cases. And deterrence and diplomacy works, and we know how to do it and we've done it, and we can do it again, and I'm in favor of it. And so it's okay, we're gonna be okay. Sure, things are, Ukraine is not on a good trajectory right now. We could go on, sure, I'm not Pollyannish, I know what the world looks like. But I also know the strengths. Tremendous strengths, unbelievable strengths and their vulnerabilities
Yevgenia Albats
On this positive note... Thanks professor Kotkin and his immense knowledge, his amazing, broad view of the world and for his time. Thank you so much. Next September 24 will be talking about the state of the Putin-