STAFF NEWS & ANALYSIS
Russia Flexes Military Muscle in Joint Exercise With Venezuela
By - September 12, 2008

Venezuela's President Hugo Chavez says two Russian bombers have arrived in the country to carry out training flights. The Russian Air Force said the bombers would be based in Venezuela for several days and fly over neutral waters. Earlier this week Russia confirmed that it would send a Navy squadron and long- range patrol planes for joint exercises with Venezuela in November. Mr Chavez has developed close relations with Moscow, including the purchase of Russian arms and co-operation on oil. Hugo Chavez announced that two Tu-160 bombers would carry out manoeuvres, saying that it was part of a move towards a "multi-polar world". "I'm going to fly one of those beasts," he joked. "The Yankee hegemony is finished," he added. – BBC

Dominant Social Theme: Good Lord, the Cold War is up and running.

Free-Market Analysis: There is no doubt that the Russians are angry with the way the United States has acted within a "unipolar" world. First the Clinton administration and then the Bush administration have pursued wars near Russia while trying to woo countries that have traditionally been in Russia's sphere of influence into NATO or other treaties. The European Union has been at it as well, inviting countries right on Russia's border into the EU and generally behaving as if Russia was finished as a nation of any significance.

Of course this is not so as the Georgian army just found out, along as a matter of fact with the EU and America. In fact, it is not a question of Russia itself so much as those who run Russia. It is easy, in fact, to speak of nation states, but the actions of individuals in one country affect those in another. President George Bush said famously that he could work with Vladimir Putin. But instead the US president badly mishandled the relationship, or seems to have done so at any rate.

The Russian leadership is angry. Putin is at the head, obviously, but there are many behind him, apparently former KGB. They are angry with the way they have been treated and they have no faith left in the Anglo Saxon elite. One may argue for hours, days, weeks as to whether if Russia had been treated differently, the current tensions might not have ignited. But they are lit now, and will doubtless stay lit.

It has been informative, unfortunately, to watch how Russia has been treated by the West since getting over the most heinous forms of totalitarianism. The West, especially America, sent hundreds and thousands of young economists to Russia to show them the way forward. Many of these economists were Harvard trained and imbued with Harvard economics which begin with the misfortune of a central bank and continue with the misery of fiat money and the inflation that inevitably follows.

It is any wonder that Russia and her leaders have reacted? Once upon a time, the Russian leadership, communist though it was, might have been more dependent on the West in a way than it is now. Like China, it is difficult to say that the Western elite, firmly in charge of Europe, America and parts of South America has many levers left to pull in Russia. It could of course, be a gigantic game. Nations often need to oppose each other in order to maintain internal controls. But somehow the anger seems different here and the resolve is that of those who have been cheated and disappointed and don't wish to undergo the same process again.

After Thoughts

It is not at all likely that another Cold War is in the offing. The Russian leadership has just announced an effort to make the Russian stock market more transparent and accommodating. Putin et. al. make regular sounds to the EU that are more businesslike than truculent. What is true, however, is what Chavez said: "The Yankee hegemony is finished."

It would have been nice if Russia had been educated by those in the West who honor free markets rather than government monopolies, monetary and otherwise. Alas it was not to be. The window of opportunity has drawn shut. If there is any positive to be taken from all this it is that the full influence of Western elites was never brought entirely to bear on Russia. Putin cleansed the Western "oligarchs" from Russia and now will likely lead Russia in his own direction, just as the Chinese leaders are leading China in their own direction. It is not necessarily a Western direction, and the West has only itself to blame for that.

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