26 min read

Whose autonomy is it anyway?

The same steps taken to ensure the monetary and financial sovereignty of the Russian state lock in interest group politics and constrain its power to act in other areas.
Whose autonomy is it anyway?
The same steps taken to ensure the monetary and financial sovereignty of the Russian state lock in interest group politics and constrain its power to act in other areas.

For the wayward political economist wading into debates more often siloed within the oft pedantic confines of international relations scholarship, autonomy as a matter of economic power politics is a bit like pornography: you may not have a fully theorized approach to analysing it but you know it when you see it. Susan Strange provided what is arguably the simplest and most useful framing in States and Markets – national economies, insofar as we organize economies into national units, exist on a spectrum between autonomy and openness. The former entails more power to control access to resources, intervene on markets, and shape political outcomes whereas the latter foregoes a fair number of powers to grant them instead to the private sphere and open up the economy for trade, capital flows, and foreign influences of different kinds, including ownership of strategically important assets. International relations scholars and the more historically minded would probably conceive of control in this case as a question of sovereignty, a word near and dear to Russian elites. This notional spectrum is quite useful as a way to think about these questions regardless of the exact terminology used. The age-old pattern of successive Russian states faced with needs to fashion variations on a 'mobilization state' capable of utilizing manpower and resources as needed by the elite for their own sakes or the good of the polity at the expense of economic growth, development, and political institutions fits nicely into said spectrum. It's safe to say that to the extent one can attach an 'ism' to the collective Putin that governs the West's consciousness of the Russian political system, it clearly fits a longer historical pattern even given novel innovations under the current regime.

However, autonomy and sovereignty can be conflated and the projection of autonomy onto states in place of the individuals, institutions, and interest groups that govern them fosters an unsatisfactory story used to describe Russia under Putin. Generalist accounts tend to rely on the story of "Fortress Russia," a narrative rooted both in domestic economic and political journalistic coverage in Russia about the regime as well as the critiques of the regime proffered by security hawks and liberal economists of Christmas past. Large trade surpluses and 'sound' fiscal policy allow the Kremlin to ride out the storm whenever external shocks strike, handle domestic crises as they arise, and pursue foreign policy priorities as the regime personified in Putin desires. Depending on who you ask, these surpluses are taken as evidence of 'sound' macroeconomic governance, proof that the rapacious kleptocracy that grips the country doesn't intend to develop it, or else proof of the Kremlin's boundless paranoia and imperial ambitions. Strands of all three assumptions are certainly true, but "Fortess Russia" is as much political PR as a meaningful analytic prism through which to assess Russian policymaking and elite choices. It certainly doesn't lend itself to the idea that those under siege in "Fortress Russia" may be fighting over what to do next nor does it provide us anything but the most barebones description of Russia's political economy.

At its core, this narrative of Russia's autonomy is about accumulation driven by oil, gas, and coal exports invoiced in US dollars and Euros and the resulting financial "buffer" that accumulation provides. Since the regime sits on hundreds of billions of dollars worth of reserves at any given time, its domestic and international freedom of action is assured. We can see the depth of the regime's ostensible commitment to this logic under Putin comparing its total reserves including gold as a % of external debt in relation to a few other former Soviet states:

Azerbaijan is far closer to a 'pure' petrostate, so its reserve levels correspond pretty perfectly with the state of the oil price and output levels. Russia is a very different story despite the centrality of oil & gas to its export basket, fiscal policy, and inter-sectoral transfers and pricing. From 1999 onwards, it climbs steadily as output surged between 1999-2005 and oil prices began their sustained rise by 2002-2003.  By the time Putin gives his infamous speech at Munich, the regime could cover the entirety of external debts with reserves held in sovereign wealth funds and the Central Bank's deposits. After the initial shock in 2014-2015, "Fortress Russia" kicks in to lift the cover back above 100% by 2018.

Monetary and financial sovereignty for the regime leads to the 'autonomy' to use force, coercion, or espionage and tradecraft as it desires. That could be after goading Saakashvili to attack in Georgia, seizing Crimea, ferrying troops and arms into Donbas, or else inserting military police, soldiers, and mercenaries into Syria while launching bombing runs in support of ground operations. It could be launching bots on American social media, lobbying for access, or using targeted assassination attempts and similar operations. It could be cutting off the gas consumers need in the dead of winter or transferring weapons systems to a NATO member. Adam Tooze's well-written overview of China and Russia's divergent experiences of economic reform and transition – inspired by his parallel readings of Isabella Weber and Chris Miller's respective work – closes with a discussion of autonomy. Both countries in their own way adopted courses of reform and engagement with the global economy that allow their respective regimes to act 'autonomously' despite being inscribed into global supply chains and economic systems. The following paragraphs, I think, represents the default narrative on Russia in this regard:

"After the crisis of 1998, the recovery in the oil and gas sector and the restoration of fiscal and monetary apparatus set the stage for Putin’s revival of the Russian state. If, as Weber says, China is deeply enmeshed into global capitalism and yet resists full-fledged integration with the institutional order of the West, the same might also be said of Putin’s Russia . . .

Russia does not break the economic rules so much as play to its strengths within them. Huge foreign exchange reserves, a reduced but nevertheless potent military and gas and oil exports give Putin the platform he needs. An opportunistic alliance with China, Russia’s fellow challenger to the Western order, offers Moscow a further degree of freedom."

Quibbles with the nature of the Sino-Russian relationship aside – this is nothing like an alliance and has structural limits – the point here is to highlight that generalists often adopt the "Fortress Russia" lens because of its ubiquity in a field of Russia experts still negotiating its debts to the security-centric lens of Cold War specialists and analysis as well as the ease with which Russia's accumulation politics fit into a certain mold of economic sovereignty. The regime's economic policies have explicitly pursued economic sovereignty since Putin's return to the presidency in 2012, but its pursuit is not the same thing as its successful pursuit nor does it necessarily lead to autonomy. It's also a narrative the Kremlin itself likes to project despite the reality of struggles across the real economy. I'm not nitpicking Tooze's account at all. Its conclusions reinterpreting the present through the late Soviet and initial post-Soviet experience reflect the way that many military and security analyses of Russia talk about the regime, the journalistic impulse to embody the Russian state in Putin, and political scientists and international relations scholars frequent preference to separate Russia's domestic politics from its foreign policy. Yet these accounts, often implicitly constructed on monetary and financial sovereignty without a close examination of the contemporary Russian economy and its more recent development, suffer significant shortcomings.

First, these accounts rarely ask what exactly had to happen in order for said monetary and financial sovereignty to be won since 1999. There are opportunity costs and decisions that create long pathway dependencies affecting the structure of domestic political economic interest groups and interests detrimental to future freedom of action or political choices. Few would dispute these claims about the late Soviet system, yet extending the analysis to contemporary matters is often hamstrung in a generalist rendering. Second, the interest groups and institutions underpinning said sovereignty react to the political needs of the Kremlin and its perceived and real constraints as does the Kremlin in kind react to theirs in in different circumstances. Not every policy choice intended to maximize 'autonomy' or sovereignty is strictly necessary or enables either effectively in the longer run. Third, what exactly is the benchmark for 'autonomy' set against? A defensive action seen as a national necessity may appear to be 'autonomous' to a foreign power or external observer, but actually evidence a perceived weakness or lack of autonomy domestically. Decisions taken to ensure monetary stability create political problems later. Today's autonomy often comes with a price tomorrow or the day after tomorrow. Finally, there is little regard for identifying the different levels at which decisionmaking in Russia takes place or the process by which it takes place. A president may be hostage to the interests briefing him or his elite base of support in agreeing to one thing such that doing nothing would be more politically autonomous, or conversely avoiding excessive foreign commitments that are technically sustainable might otherwise be avoided because of the political repercussions with the public.

Rethinking the 2000s

Russia's stabilization in 1999, strongly aided by a ruble devaluation, coincided perfectly with Putin's rise to power. The political deal he effectively made was to leave Yeltsin's inner circle alone as the price of a peaceful transition of power. Given that Evgeniy Primakov had already established a consensus wherein the state would actively intervene on markets as a matter of macroeconomic stabilization, the first steps taken by the government led by Putin were primarily about providing a longer-term basis for said stabilization. Reforming oil sector taxation, taxing crude oil exports, land reforms supporting privatization, and the imposition of a flat tax code supported an improved business climate and surge of tax revenues. There were other costs, of course. Cutting deals with organized crime to reduce crime rates and impose order at the expense of allowing profits to continue and an understanding that Chechnya and neighboring regions in the North Caucasus be effectively paid for their loyalty in exchange for greater regional autonomy come to mind as prime examples. Using real levels from 1999-2012 in place of USD figures, we can see the outlines of the energy story upon which Russia's autonomy came to rest:

One can infer the effects of Russia's resource dependence from these figures. Notice that the gap between increases in investment levels and GDP per capita keeps growing after about 2002-2003 and surges for 2006-2008. Some of this divergence is a function of the structure of the economy simplifying and clustering in the resource sector as export earnings and managed ruble rate make it cheaper to import. As prices rise in USD for oil, gas, and other commodities, the prices for imports of goods and services paid for in USD tend to rise as well. Fixed asset investment levels then increase partially in relation to the cost of imports, affecting other industries. What could have been a period ripe for industrial policy using imposrt substitution measures flashes by with the opposite trend: the Russian economy becomes less complex. The timing of the sudden hike in the investment gap in 2006-2008 is important because of combined institutional effects, a wave of energy investments built around the Eastern Siberia-Pacific Ocean pipeline (ESPO), and Russian fiscal policy. First, the oil side of the equation:

The output gains from 1999-2003 were led by Yukos followed by a few other privately-owned oil producers making use of western management techniques and equipment to massively improve the efficiency of Soviet-era assets. That phase of output growth plateaus by 2005-2006 as Yukos, the largest oil company in the country, was effectively nationalized and most of its prime assets handed off to Rosneft. The oil industry had been concerned going back to the 2001 tax reform that the relative increase in the tax burden as designed made new exploration far more costly and hoped that the state would increase funding for Rosgeologiya, the state-owned explorer, to high enough levels to offset lost private investment. That never quite happened. By 2006, higher levels of investment into new finds were needed. Once Rosneft took over Yukos' prime assets, investment costs rose as the company was happy to exploit its ability to borrow backed by the sovereign and grow via acquisition instead of organically. Oil output actually declined in 2008 from 2007 levels thanks to these struggles.  

When the global financial crisis hit in 2008, MinEnergo and the Kremlin were talking about developing Arctic reserves to offset expected declines in Western Siberia. It had become widely acknowledged that newer finds in more remote areas are more capital-intensive in the early stages given lower quality or else absent infrastructure. The divergence between investment levels and GDP per capita reflected the growing costs of Russia's resource dependence and need to transfer a rising amount of resources into other sectors of the economy either to support investment or else raise consumption to make further capacity gains attractive for manufacturers and service firms. Lots of factory capacity was being used again and some new capacity built, but we also see that the balance of payments surplus stopped rising as Russia's urban middle class saw its income and ability to consume imports rise in tandem. Given Russia's a higher-end middle income country, it wasn't a massive expansion of domestic manufacturing providing these newer consumer goods. Instead, the services sector grew to meet new needs as oil prices and output coupled with natural gas fueled the boom and paid for consumer goods and capital goods imports. The structural adjustment toward a consumption-led growth model was clearly necessary from the underlying data by the mid-2000s, even if there isn't a 1:1 relationship between investment and GDP per capita.

When Russia invaded Georgia in 2008, its position was secure financially and monetarily, but there were already signs of a Russian version of the resource curse beginning to appear in the real economy and affecting the domestic balance of political power when it came to economic policy. Even the public finances story that now predominates is primarily an institutional one reflecting a political low-base effect from the 1990s. Consider the % of revenues spent paying off external debt over the 1999-2012 period when growth was strong overall:

Before Russia had accumulated a particularly large volume of reserves, the % of state revenues being spent on debt payment was falling fast towards levels seen on developed markets with strong currencies. High inflation in 1999 into Putin's first years coupled with strong growth and a strong expansion of state revenues due to tax reforms and the centralization of political power made the burden of Russia's debt quite manageable without the accumulation of massive reserves insofar as said reserves weren't income covering current expenditures. They were parked aside and not circulating in the economy by fiscal policy mandate into an account with akin to a treasury account and then into sovereign wealth vehicles. Central bank reserves reflected corporate earnings:

The scale is off because of just how high inflation was in 1999. Still, the trend for growth is about half of the best performing pre-crisis years and would hit 1.7% in 2013, a figure only capable of sustaining stagnation in Russia because of the fast rate of asset depreciation and unfavorable demographics among other things. Accumulated reserves could have done more to smooth that growth path since the surge in incomes provided ample space to increase investment into infrastructure in particular. The failure to spend in the 2000s on public goods and industrial capacity would then create conditions for surges of inflation in the 2010s and early 2020s whenever Russian GDP growth broke out of its usual 2% ceiling.

A Kommersant interview with Alexei Kudrin, finance minister from 2000-2012, goes to show that the "Fortress Russia" narrative built upon reserves didn't reflect his own priorities:

"When I became minister in 2000, I dreamed that the [oil] price wouldn't be lower than $20. Then year after year it rose and I felt that when it reaches $40 or $50, then there are clearly proven patterns in the world [economy]. They say that when a national currency strengthens due to this, imports start becoming cheaper and overwhelm the market, crowding out domestic production. That's why if you ask me why the reserve fund was created, it wasn't money under the mattress for a rainy day as many think up till now. It now plays that role, but that's its second role. It's first role is to prevent the national currency from appreciating so quickly that domestic production becomes less profitable than importing."

In other words, the state was managing its own version of Dutch disease (and failing) rather than piling up gold and liquid assets to beat a recession. That was a secondary function, one that also had the added benefit of strengthening the federal government's control over the circulation of large volumes of money into large projects. Russia did run down its reserves to address the effects of the global financial crisis, but it still didn't do nearly enough to manage structural adjustment. For instance, it could have opted to devalue and float the ruble then instead of 2014-2015 and help Russian manufacturing while facing a more favorable oil price environment based on the actions taken by the Federal Reserve, European Central Bank, Chinese and American stimulus spending, and G-20 coordination. If we look at Russia's fiscal policy pre-2009, it becomes even more apparent. The following graphic is from a report Andrei Movchan, founder of Renaissance Investment Management Group, wrote for Carnegie back in 2017. It shows budget surpluses and deficits as a % of GDP:

Some of these figures can be attributed to Russian fiscal institutions simply being overwhelmed by the influx of revenues relative to spending plans, but the implication is clear. Russia ran a larger fiscal surplus in 2006 on a GDP basis than its deficit during the worst of the crisis in 2009. In fact, its 2009 deficit wasn't much larger in relative size than its 2007 surplus amid the oil sector slowdown. Financial reserves were crucially important to firefighting the worst of the shock, yet reporting from Mikhail Zygar in All the Kremlin's Men suggests that Medvedev bargained down the size of the stimulus package. The preference for loans over direct spending fueled a huge borrowing expansion through 2012 that would haunt policymakers later. Despite Russia's considerable spending, its growth didn't recover post-crisis to pre-crisis levels because it had run out of room to run relying on transfers from the oil sector to the state sector and other industries. Households were no longer reaping the benefits. Without a readjustment of fiscal policy in line with industrial and trade policy and a commitment to consumption-led growth, joining the WTO or efforts at 'innovation' would mostly be cosmetic.

The crisis was a political opening to reconfigure the basis of the regime's legitimacy and approach to economic policy. But the use of manual control predominated, a point cited by former Alfa Group director and Navalny ally Vladimir Ashurkov as what drove him towards political work. Medvedev lacked the heft within the political system to achieve that. Putin's infamous dressing down of Oleg Deripaska had little to do with the state disciplining business in a substantive, systemic sense. After all, the state had midwived many of these wasteful contracts and practices and massively underinvested in public infrastructure and public goods that would have supported more business investment in the first place. Rather Putin needed to assert his primacy in managing elite affairs with leading state managers and apply personal pressure to appease the public. He was actually proving that Medvedev couldn't do either effectively in that moment, and therefore closing a reform window since he was really saying "I let you guys be richer than you could have dreamed of, and this is the best you can do!?" There was no meaningful crackdown on Russian big business. Companies' gross profits as share of national income climbed rapidly when Putin came to power after all:

Fortress Russia had underspent and underplanned its capacity to sustain growth once the period of transfer gains ended. Reserves helped the regime survive the gale force winds of 2008-2009 without sweating as much as they might have otherwise, but the recession wouldn't have been as deep had the economy not been allowed to simplify as it had despite Kudrin's best efforts and oil prices recovered fairly quickly. Reserves played very little role in paying off external debts and mostly helped the country's largest firms or businesspeople when they wanted to borrow in foreign currencies. Dollar reserves could also reduce the cost of borrowing domestically, but through the 2000s, the real interest rate – nominal interest rate minus inflation – was negative most of the time. There was often little reason to save and borrowing was cheap. The state was doing it to backup SOE and large firms borrowing abroad and underdeveloping the public's capacity to do so in the future in the process. Corporate profits for allies of the regime came first and enough trickled down to make it sustainable without structural reform. The picture gets more complicated still when considering that Russia's capital outflows often reflect the preference to make sure one's money is out of reach of the Kremlin during the boom years, but that merits a different discussion. The larger point using the 'real' interest rate as a measure is that the Kremlin finally achieved the level of monetary stability it desired just when Crimea happens and refuses to budge off course, raising the relative cost of borrowing right when the economy's investment needs changed in composition and cost.

Rehsaping the Regime's "Lower Depths"

When protests erupted in 2011, the public's faith in the president was at its lowest point since Putin ran for re-election. Whatever was intended by demonstrative assertions of the state's power over businesses during the crisis, the rokirovka shattered the relevance of any state as savior narrative in politics:

Red = president Black = government Dark Blue/Cyan = regional authorities Grey = local government Yellow = Duma Orange = Federation Council Light Blue = Parties

The Balotnaya protests and attempts to mobilize voters undertaken by Navalny and the rogue's gallery of nationalists, liberals, social democrats, and more were taken by the regime to be a revolt of the urban middle classes. Those whose incomes had risen during the boom years and been the ones buying many of the consumer imports were no longer a reliable base of political support. By the time they wrapped up in 2013, stagnation in the economy had set in. 2013 GDP growth was an anemic 1.7% despite oil prices still trading above $100 a barrel and headed towards recession by the end of the year months before Crimea was annexed. The middle class couldn't be trusted to provide political legitimacy to the regime both because of the lessons of the protests as well as the failings of an unchanged economic model. Without growth, it's difficult to buy the votes of aspiring strivers or anyone convinced after a decade of rising living standards that things could actually change. The result was a shift towards a political reliance on pensioners, those employed by state-owned enterprises and firms across Russia's own "rust belt" in Siberia, military families, and the apathetic where possible. Crimea provided a mobilization boost in this respect, but if we imagine a counterfactual without Crimea happening, there was already the economic justification for a new voter coalition reliant on those who don't necessarily suffer from broader stagnation.

Though the oil shock that followed the sanctions shock in 2014 created a situation in which the Central Bank was desperate to stanch the bleeding, it's worth remembering that between the end of 2013 and 2015 the Central Bank actually only ran down reserves about $150 billion with $368 billion to spare. Even with oil market uncertainty and the rush of capital outflows, the application of the new budget rule imposing a $42 a barrel cutoff at which point additional revenues would be apportioned to the National Welfare Fund (NWF) in the wake of Crimea paid off. There was still plenty in reserve available after the oil market bottomed out in early 2016 and there was fiscal options to manage the problem when sanctions hit. So why float the ruble in 2014 and not 2008-2009 when the 2015 recession (and 2016 stagnation) weren't nearly as deep as the prior crisis? There were considerable worries about external debt held by state-owned enterprises, including Rosneft and Gazprom, but just as important was the shift in regime political dynamics. A ruble devaluation would have been devastating for middle class consumers in 2008-2009, but by 2014, they were more politically expendable. Since consumers weren't driving growth or the regime's legitimacy, they lacked political salience and power (even given many continued to support the regime).

While Russia's macroeconomic framework had been orthodox and supply-side heavy going back to 1999, now its supply-side institutions, SOEs, and leading banks and firms would become much more significant organizationally in the contours of and resolution of political conflicts. Oil output growth never grew quickly again as new fields had to be developed. Successful private operators like TNK-BP would be acquired by Rosneft in megadeals financed using prepayments and loans from China denominated in USD. There were no "low-hanging fruit" for oil as there had been from 1999-2005. A weaker ruble would allow oil firms to increase their domestic profits relative to costs:

While oil & gas firms benefited as did agricultural producers that successfully lobbied for import bans, manufacturers theoretically would as well. The structural adjustment that had already been needed by the mid-2000s was now underway, except that the devaluation was taking place amid austerity as well. Compressing incomes at the same time imports became more expensive while increasing the tax burden outside the oil & gas sector was sustainable because of how the regime's new voting constituencies could benefit from lower inflation. If you're retired or living on a fixed income like a pension payment, even one that's been slashed in real terms, you want prices to be as stable as possible. Social transfers still account for about 20% of national income today. Civil servants and anyone on a state salary can count on their wages being indexed to inflation as well while those in the private sector face a much more difficult environment. There's also a self-perpetuating dynamic whereby government institutions prefer lower inflation for long-term planning needs. Before you know it, another exogeneous shock (COVID) forces the state to consider an all-of-government approach to control domestic price levels relative to global ones while continuing to pursue import substitution targets as the cost of subsidies to industry continue to rise.

Once the regime abandoned the middle class as a core 'plank' of support, it became much easier for the individuals and sectors that control the commanding heights of the economy to lobby for their policy preferences at the expense of the public and coherent economic development. Whereas Gorbachev tried to accelerate out of the interest group impasse preventing structural reform from taking place, the regime assumed that doing so would set off another inflationary power struggle. Still, once you provide significant subsidies to one industry, others follow shortly after demanding more. Mikhail Mishustin, the current prime minister, now invokes uskoreniye in a stark linguistic choice. Given the decision to increase security and defense spending faster than spending on the economy for 2022-2023, stagnation coupled with repression seems to be the only way forward. Increases in federal spending on the economy parallel exogeneous shocks more than a long-term strategy:

Defense wins out, and those figures are rising again post-pandemic. What began as an accidental patriotic mobilization in response to Crimea to forge a bond with the public has devolved into a catch-22: growth and inflation or stagnation and repression. Either option poses deep political risks that appear irresolvable for now. Additional export gains for manufacturing from Russia will probably come as a result of continued or further income compression given the country still has too high an average income to compete with exporters that have cheap labor globally. And the more these gains are realized as a result of state subsidies and support, the costlier and more brittle the political impasse for reform and growth becomes.

Arguably the main political lesson of the 2000s and 2011 was that rising incomes create legitimacy risks should the regime pursue a consumption-led growth model. Easier to concentrate political power on the supply-side and impose vertical structures of power, whether they be at the office, the ballot box, or in governmen when voters depend on the state. The affective power of the annexation of Crimea in Russian politics, I would argue, obscured this material shift somewhat from view. But the newer coalition still wants living standards to improve and its durability has appeared weaker with each passing parliamentary and presidential election. Rural voters bought the Kremlin space after 2014 to avoid the political consequences of economic underdevelopment as a result of policies that have benefited corporations and asset owners. Whatever leeway Crimea afforded Sergei Kirienko and other domestic political 'curators' was exhausted by the time COVID struck and the regime once again spent too little too ineffectively to make use of a shock to lay a foundation for future structural reform. COVID, the energy transition, and the entirety of the daily newsletters here at OGs and OFZs are reacting to 20+ years of missed opportunities and over a decade of ignoring the evidence that consumption is the best motor available to grow the Russian economy and strengthen its links with other former Soviet states.

What we talk about when we talk about autonomy

Reconsidering the really-existing politics of accumulation in Russia shifts the question of autonomy at the national level and as a concept. The regime's interest groups have always been split between voting blocs, the defense and intelligence apparatuses, and competing elite interests tied up in business lobbies and personal networks. What otherwise look like painful policies were manageable from 1999-2012 because of high oil & gas prices. Absent structural adjustment towards a consumption economy, the model of transferring wealth generated by hydrocarbon exports to suppliers of state procurements and manufacturers ceased to raise incomes anymore. Once the agricultural lobby succeeded in getting Moscow to impose counter-sanctions on EU imports after Russia was sanctioned, the slowly developing policy of economic sovereignty via import substitution took off. Having exhausted growth from domestic demand thanks to Russia's economic mismanagement, the only options left were exports or subsidies for marginal growth unless a business could improve efficiency on existing markets or make a new one. E-commerce and logistical improvements by retailers fall into this last category, the rest tended to look for subsidies or other forms of support when possible. Small and medium-sized firms were left behind and the tradeoffs of domestic and foreign policy decisions shifted.

Whenever an account refers to Russia defending its "autonomy" to act, one wonders what exactly is intended. Moscow's autonomy of action has never actually depended on large financial reserves, though they've been an important part of currency and macroeconomic management based on the long-standing consensus framework for policymaking. Time, greater political stability, and institutional improvements were the most important components needed to manage something like the invasion of Georgia in August 2008. Even at its lowest points, no right-thinking individual would want to risk a direct confrontation with the world's second-largest nuclear power, only a peripheral one. NATO's intervention in former Yugoslavia never threatened a direct, vital interest of the Russian Federation. It threatened Russia's status.

The Russian invasion in 2008 fit into a broad elite consensus that Russia remained a great power and had privileged interests across Eurasia, though its execution and nature of a Russo-Georgian crisis may have differed under a different regime. When Moscow annexed Crimea, the playbook in dealing with a strong nuclear state was still fairly limited. The regime had opted to focus on military modernization back in 2011, which then made the military a more effective and preferred instrument in dealing with Ukraine by 2014 and the West could only realistically resort to sanctions. By 2015 in Syria, the same problem persisted: there was only so much that could be done to stop a nuclear power with a large and strong military from deploying militarily to a state whose official government, however illegitimate it might be with the public or foreign commentators, invited them.

These are the prime examples given militarily when it comes to Russia's exercise of its 'autonomy,' but they tell us very little about the significance of said autonomy. One of the harsher realities to swallow in Washington and across Europe is that many states can do a lot of things that can't be stopped or reversed, only punished after the fact. But the content of that punishment varies as does its effectiveness depending on the state, its relationships, its position in both the global economy and for friendly or not-so-friendly states, and its domestic political economy. That they haven't in the past can reflect weaknesses of various kinds, but also a lack of desperation or conviction that action is necessary. If Russia's autonomy can be reduced to being able to do things the West doesn't like without being stopped, that has considerable limits. Moscow's limited intervention in the war in Karabakh last year challenges the assumption of an expansive autonomy given Turkey's role in the conflict. Limited success extracting concessions from Lukashenko in Belarus despite its near total dependence on Russian largesse suggests the same. A cautious and uneasy response to the US withdrawal from Afghanistan confirms a different outlook today. Putting it simply, Russian foreign policy does not reflect some special degree of autonomy. It reflects the reality that nuclear-armed states with large, well-funded militaries have more sovereignty to act than small states without one or both. This is also where autonomy and sovereignty are conflated. Turkey's freedom of action in Syria is reflective of the fact that it's a NATO member, so any Russian attack or accident risks a much larger response. A state can cede formal sovereignty in order to gain more autonomy and interest groups within a state benefit differentially when states do so. Consider the storied history of the City of London and the free flow of capital among countless other examples.

Applied in an economic context, the edifice of monetary and financial policy choices taken to ensure the Kremlin's autonomy undermine its attempts to achieve the same level of autonomy across the real economy. Import substitution requires stronger competition and consumer demand domestically to work effectively. Economic autonomy can't just be maintaining trade and budget surpluses. Both exact a steep toll on the regime's voting base, a voting base that's now effectively being told that increased pressure on speech, arrests, and repression will replace rising incomes as the mechanism by which the Kremlin ensures loyalty. Investment levels may have temporarily surged, but we've already seen the growing level of additional investment needed to lift GDP per capita going back to the 2000s. Then consider the cumulative effects of the energy transition in this light. The oil & gas sector still provide the glue holding the federal fiscal system together. Coal miners and other extractrive industries are a crucial constituency for countless monotowns across Siberia built by the Soviets. All of these industries also provide significant forms of domestic subsidy or price controls between sectors. Suddenly the regime's long-term planning has to account for external changes completely beyond its control with drastic implications for its domestic policy options.

Gazprom is the classic case of Russia's coercive economic diplomacy, and even that suggests autonomy isn't the right framework. The EU's response to Gazprom's gas cutoffs via Ukraine in 2006 and 2009 was to agree to Nord Stream, yes, but also to pass sweeping energy market reforms and use antitrust powers to compel Gazprom to behave as a proper market actor rather than a political one. Now that the company is actually doing so is inconvenient during a supply crunch since the role of "swing supplier" is normally a political one – an agreement to leave capacity idle and forego profit or market share advantage in exchange for greater price stability and to ramp up supplies during shortfalls for the same reason.

None of this is to say that autonomy is an irrelevant measure or not part of the calculus of Russian elites in Moscow. The ability to withstand foreign sanctions pressure is perhaps the single most important political driver of continuing import substitution efforts. But the policies needed to achieve that autonomy don't come free. They reduce incomes among households, create increasingly poor tradeoffs for the regime, and can't change the factor that drove Russian growth from 1999-2012: external demand. It's not just oil, gas, and coal. Defense exports are at stake. It's not shocking that the defense budget is now being increased after US sanctions pressures have disrupted some defense export deals and the sector's considerable debt burden is increasingly a headache to manage.

Autonomy at the national level tends to reflect one's own biases about the ability of states to act in a global system where the US military is seen as exorbitantly dominant. This tends to significantly overstate the relative power of the United States to simply make what it wants happen as well as understate the capability of weaker states with a nuclear umbrella and sufficient will to use force without too significant a risk of war. Autonomy at the regime level domestically similarly overstates the Kremlin's power to rule by diktat and understates the role of interest groups and bases of public support in shaping policy "menus" if not necessarily specific outcomes. And all of this sidesteps the philosophical question of whether or not political actors are truly "autonomous" if they feel they must commit to a course of action to preserve either themselves or their national governments. Autonomy doesn't come free and can narrow political choices as much as it seems to expand them. Not every door can be kept open forever or without erecting a wall to walk through in the first place. You can't have autonomy without opportunity costs, and they can be far steeper than anyone can predict on a long enough timescale. Analyses of the United States are quite open in acknowledging its political limits despite its material and financial advantages. High time a similar standard be applied to Russia no matter one's proclivities when it comes to describing its place in international affairs whether that be a matter of political economy or security.

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