Why Russia Is Really Weak; What happens to Russia when--not if--oil and gas prices begin to retreat?(Cover story)

Byline: Rajan Menon and Alexander Motyl

News stories about Russia these days follow a predictable theme. The country is resurgent and strong, and the West must adjust to this new reality. But that story line is wrong. Russia is weak and getting weaker.

Take the conventional index of power--military might. Yes, Moscow is testing advanced missiles systems and talks buoyantly about countering a U.S. antiballistic-missile system with a new generation of warheads that can evade interceptors. Yet note the failure earlier this month of the highly touted Bulava submarine-launched missile. The United States experiences such mishaps, too, of course. But in Russia they are signs of something deeper. It's no secret that, for all Russia's new oil wealth, its Army remains poorly trained, malnourished and demoralized. Alcoholism, suicide and corruption are rife. Weaponry is aging and newer models arrive at a trickle: India has bought more Russian tanks since 2001 than the Russian Army.

Russia gets credit for economic growth--nearly 7 percent this year, according to the IMF. But the boom has been propelled mainly by rising energy prices. What happens when--not if--oil and gas prices begin to retreat? New investment in production capacity is insufficient to sustain current levels of exports. Meanwhile, economic reform has stalled, state control over strategic economic industries has increased and foreign investment remains low. Of the $648.1 billion in foreign investment worldwide in 2004, only $11.6 billion went to Russia. Not surprisingly, Russia rates poorly in globalization rankings. The 2005 Foreign Policy/A.T. Kearney survey placed it 52nd in a list of 62 countries--a drop of five places from 2004.

Russia's human capital is being ravaged. The population is declining by some 750,000 annually because of low birthrates and unusually high death rates among males; it's also aging rapidly and will therefore become increasingly less productive. Alcoholism remains pervasive, as does drug use. Russia has the highest rate of tuberculosis in Europe. AIDS has yet to crest. Suicide is one the rise. According to WHO data on 46 countries between 1998 and 2003, Russia, with 71 cases per 100,000 of the male population, topped the list.

A nation's power also rests on the strength of its ...