US-Russia confrontation could drift to Mideast
The question is whether Iran, Egypt, or Saudi Arabia, in particular, will change their policies in the context of the US-Russia standoff.
As Russia moves steadily toward annexing Crimea — and the United States and Western countries respond with sanctions and other steps — the risk of an extended global confrontation is growing. Although any confrontation between the West and Russia would likely differ significantly from the Cold War because of today’s massive economic imbalance between the two sides, it may also look like the Cold War in some respects. Among these may be a struggle for influence in the Middle East with unpredictable results.
With 1.3% economic growth last year — without a major geopolitical crisis or Western sanctions — Russia’s financial resources will be strained and its options limited. Still, the Central Bank has nearly half a trillion dollars in reserves, which could help Moscow to manage an economic slump for some time, possibly two or three years at current energy price levels (oil and gas revenues make up about 50% of Russia’s federal budget revenue, with oil providing the vast majority of this).
If Western-Russian tensions escalate, the Russian government’s immediate priorities will be to inject state funding into the economy in order to sustain political support and to find additional revenue. The new money will be especially important; a Russian newspaper’s analysis puts the costs of annexing Crimea at $20 billion over the next three years.
At the same time, Russia’s officials are sufficiently pragmatic to know that they cannot prevail in a tit-for-tat exchange of economic sanctions with the United States and the EU — Russia’s economy is one-eighth the size of the US economy alone. This will encourage Moscow to look for asymmetrical instruments of pressure on America and Europe. More challenging for Russia would be stitching together these tactical efforts into a coherent strategy that leads to greater regional influence.
