Russian politics in 2015 will continue to be shaped by two simultaneous crises, external and internal. While the external crisis affecting Russia — the conflict with the West over Ukraine — is attracting global attention, the internal crisis goes largely unnoticed or, even worse, is erroneously viewed as the result of Western sanctions.
In reality, the economic crisis in Russia started in 2013, long before Western sanctions. It was primarily caused by structural problems of the Russian economy and later was exacerbated by the sharp fall in oil prices and renewed economic decline in the EU, Russia's main economic partner.
Sanctions is an additional complicating factor but of secondary importance. For the coming two to three years, Russia will be passing through a period of stagnation and recession as it transitions to a new economic development model. The government's focus will be on gathering and maintaining the necessary political capital to undertake unpopular reforms and budget cuts.
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An assertive foreign policy, including annexation of Crimea and support of the rebellion in eastern Ukraine, serves these goals perfectly. The country is experiencing a spectacular rise of national unity and nationalism that would be typical for late 19th century Western Europe. As result, Russia will not be interested in making significant political concessions on Ukraine in exchange for lifting the sanctions. Whether sanctions are removed or increased will have limited effect on Russia's economic situation. And demonstration of weakness could be politically suicidal.
That does not mean we will necessarily see a new round of hostilities in Ukraine in 2015. The military situation in the eastern Ukraine became a strategic stalemate after the Ukrainian Army was defeated in the battle of Ilovaysk in August. Ukraine is facing an economic disaster and new political instability, and the Army is in disarray, but rebel forces appear to be too poorly organized and controlled to take full advantage.
Russia is interested in freezing the conflict either by turning the current Donetsk and Luhansk republics into unrecognized states or by obtaining Ukrainian consent for the widest autonomy for these territories in the framework of the Ukrainian state. These would achieve Russia's main policy goals in Ukraine, and Moscow then would be interested in complete military de-escalation.
At the same time, Russia will continue an assertive line in relations with the West because Russia does not feel it has much to lose. For Moscow, the Cold War has already started. It began when the US and EU supported a rebellion against a democratically elected government of Ukraine on the sole ground that the government chose a pro-Russian foreign policy.
The additional US deployments in Western Europe will be reciprocated by increased activity of the Russian Air Force and Navy along NATO borders; any tough statements from the West will be answered in kind.
Russia is preparing for a period of prolonged political confrontation with the West, and that pushes Moscow toward closer military, political and industrial cooperation with China. Next year we will see increased joint military activities, including a naval exercise in the Mediterranean, and new arms and high-tech trade deals.
But Russia is still keen to avoid excessive dependence on China and is trying to increase cooperation with the Asian region in general. As the active military phase in Ukraine ends, Russian decision-makers will turn to their traditional source of security concerns — Central Asia. That could create opportunities for cooperation with the US, but it is unlikely the current leaders of both counties will be interested to use that opportunity.