The Art of Foreign Policy: How Russia Maintains Economic Power in the 21st Century | Oliver Peter Smith
Mikhail Gorbachev gave a speech in 1985, in Leningrad, highlighting the failures of the Soviet economy and lashing out at communist activists in the process. Here, Gorbachev stated that they ‘squander countless resources in every industry.’ This was undeniably true. In the words of two Soviet economists in 1989 regarding Soviet economics, Nikolai Shmelev and Vladimir Popov, there are “far too many economic relationships, and it is impossible to take them all into account and coordinate them sensibly.” The era of Soviet economics, in which its prices had been entirely controlled by its government, had started to come to an end after an era of stagnation. Gorbachev and his administration introduced a set of reforms over his premiership, known as perestroika, in which the soviet economy would revitalize itself towards a more open, market orientated system. This system saw the Soviet economy utilise the international competitive market, and perestroika would consequently set the tone for Russian economic and foreign policy for years to come, far after the collapse of the Soviet Union.
Therefore, Russia has large influence over the international competitive market in the 21st century through oil, natural gas, timber, and minerals, and its continued foreign direct investment into Africa, Asia, and South America marks a significant change after the regionalism seen during the Soviet Union. This reliance on the international market places a particular emphasis upon foreign policy; international relations are as important as ever to the Russian economy and a poor a foreign policy could risk an economic crisis. The current President of Russia, Vladimir Putin, and his administration, has of course recognised this importance of foreign policy to its economic power and it has often dominated Russian politics over the course of Mr Putin’s tenure.
However, Russia’s foreign policy is becoming harder to achieve as opposition from the West continues to grow. The United Kingdom’s Integrated Defence Review has highlighted its perceived threat from Russia and its government has pledged support towards Eastern-European countries. Meanwhile, the United States and its allies has plagued Russia with sanctions after its annexation of Crimea, and NATO has developed a strenuous relationship with Russia after altercations along the Russian and Ukrainian border. Therefore, management of foreign policy has increased in complexity and difficulty for the Kremlin. If Russia is to maintain its economic power in the 21st century it thus must have a foreign policy that can adapt to its changing circumstances. An assessment of Russia’s activity in Africa illustrates that this adaptable foreign policy has existed for half a decade. This adaptable foreign policy is a utilisation of private military companies.
Private military companies (PMCs) are not a recent advent. The first PMC, WatchGuard International, was founded in London in 1965. Its primary objectives were to be contracted out for security and military purposes, with its members consisting of experienced ex-service personnel. Its first contract was to go to Yemen and to report for the Royalist forces after a cease-fire had been declared, and thereafter it had been involved in plots to overthrow Colonel Mu’ammar Gaddafi from power in Libya in 1971, as well as becoming heavily involved in the Gulf States and the countries of Africa.
The private military companies of the 21st century serve the highest abundance of PMC’s, with the United Kingdom and the United States having over twenty PMCs between them, the most notable of all being Northrop Grumman. Within the 21st century private military companies have pursued a range of contracts with varying roles. Erynis International, a British private security company, had a subsidiary that was granted a contract to recruit and train an Oil Protection Force (OPF) for the Iraq Ministry of Oil in 2003. The subsidy of Erynis International, Erinys Iraq Ltd, had a total of 16,000 Iraqi staff recruited for its OPF at over 282 locations. Furthermore, KBR is a US defence and aerospace company that has acquired over $216 million of contracts in Afghanistan to train foreign troops from Georgia and construct base camps at Kandahar, signifying the importance of these PMCs in modern conflict.
PMCs are set to increase in importance and versatility throughout the near future. International conflict continues to persist as natural resources increase in importance and border disputes continue. The continents of Asia and Africa are likely to feature the most severe conflict, with both continents hosting a range of developing countries seeking both resources and power to compete throughout future decades. Libya, for example, is a country of primary concern to international agencies regarding conflict, and the politics of the South China Sea continues to increase in tension as China tests the resilience of Taiwan.
However, private military companies are outlawed in Russia, though in 2012 Mr Putin stated that he was open to the idea. Despite this, there are reports of multiple PMCs operating within Russia over the past decade, with the most notable being the Wagner Group, the E.N.O.T Corps, the MAR, and the RSB Group, of which have received contracts to operate in Africa, Asia, South America, and Europe. These PMCs are reported to have extensive ties to the Kremlin, and thus the utilisation of these PMCs have emerged as a prominent feature of Russia’s foreign policy through heavy interference into international conflict. This interference creates a collection of economic opportunities, and the role of the Wagner Group and other PMCs in Libya act as a primary example.
The Wagner Group is the wealthiest of the Russian PMCs. It became active in 2014 and it is reported to be founded by Dmitriy Valeryevich Utkin, a prominent former member of GRU. The current leader of the Wagner Group is reported to be Yevgeny Prigozhin, a Russian oligarch with close ties to the Kremlin. As of 2017 it is estimated that the Wagner Group has over 6,000 members, with these members often consisting of ex-military and ex-paramilitary soldiers with a wealth of experience in conflict scenarios and a reported salary of 80,000-250,000 rubles per month.The group is reported to train its members at a Russian Ministry of Defence facility, though this facility is not linked to the MoD in court documents.
The Kremlin has excessive ties with the Wagner Group, and this has created concern amongst the international community regarding not only the power of the Wagner Group but the subsequent influence of the Russian government too. Mr Utkin was photographed with Mr Putin in 2016 at a Kremlin reception, where several reported high-ranking officials received awards. Furthermore, Mr Prigozhin had been dubbed as “Putin’s chef” in an article published by the Associated Press after he had hosted Mr Putin at restaurants, owned under his catering business, with foreign diplomats. According to an investigation by Der Spiegel, The Insider, and Bellingcat, Mr Prigozhin’s operations and interests are “tightly tied to Russia’s Defence Ministry and its intelligence arm, the GRU.”
Mr Putin has not outright denied the existence of the Wagner Group, despite the Kremlin refusing to acknowledge the existence of the company’s contractors. In December 2018, Mr Putin stated that “everyone should remain within the legal framework” regarding Wagner Group activities in Ukraine and Syria, and that if the group had been violating the law the Russian Prosecutor General’s Office “should provide a legal assessment.” However, Mr Putin denied allegations that Mr Prigozhin had been directing the operations of the Wagner Group.
Despite the confidential nature of Russian PMCs, there has been a major increase in the number of Russian PMCs operating across the globe, most prominently in developing countries. According to the CSIS, the centre of this increase has been in the CAR, Libya, Sudan, Ukraine, Syria, and Iraq, Afghanistan, and Venezuela, all countries of which feature conflict and high tensions. These PMCs have accepted a range of contracts, and thus providing multiple revenue streams for the PMCs and the Kremlin throughout these developing countries. These contracts have created a range of roles for Russian PMCs, including the provision of equipment, propaganda, and the security of oil and gas terminals and ports. Therefore, these PMCs have huge influence over the politics and economics of these developing countries and given the extent of the connections these PMCs have to the Kremlin, the Russian Government also has access to this influence.
The conflict in Libya is a primary example of this economic and political opportunism. The Kremlin views General Khalifa Haftar and the Eastern based government in Tobruk as a key ally and its allyship could provide geographical and economic benefits. Libyan allyship would, for example, give Russia access to extensive oil reserves and natural resources, of which is crucial to Russia’s economy. As of 2016, Libya had over 48,363,000,000 of proven oil reserves, amounting to 2.3% of the Earth’s total proven oil reserves. It is these economic opportunities, that despite opposition from the West, can prove to be so valuable. Thus, The Wagner Group and other PMCs have been active in Libya since 2015 in support of General Haftar and the Libyan National Army (LNA).
According to Turkish President Recep Tayyip Erdoğan, it is estimated that the Wagner Group deployed up to 2,500 soldiers into Libya at the height of its involvement. This occurred as the LNA began to push into Central Libya and its deployment became highly beneficial, with the Wagner Group obtaining several essential roles. The first of these roles was to equip the LNA with modern and effective weaponry and equipment. This equipment amounted to military vehicles, infrared-guided missiles, tanks, and several combat aircraft equipped with a night-strike capability. Much of this equipment had been used to capture a range of key oil terminals in 2016 that had been subject to fierce conflict with local militias. In coordination with the provision of equipment, the Wagner Group also trained the LNA in the use of these systems alongside ground warfare tactics.
Libya’s large oil reserve means that there are many locations of high importance across the country, such as oil and gas infrastructure, as well as ports. The importance of these locations ultimately meant that multiple PMCs assumed the role of site protection. The Wagner Group and the RSB Group have been most prominent in assuming these roles in a variety of locations, ranging from Tobruk to Benghazi. In 2017, the RSB Group secured a contract to deploy its operatives to industrial plants in Benghazi to act as security. This contract is the first of many examples of the influence PMCs hold over the Libyan energy industry and their importance to the Libyan economy. As a consequence, this influence gifts these PMCs, and the Kremlin, with an opportunity to retain this influence for decades to come through powerful management and decision making positions.
However, perhaps the most influential of roles handed to Russian PMCs had been the implementation of Russian propaganda into the Libyan media. The Kremlin has utilized propaganda heavily within its own country and has been found to actively promote its propaganda in foreign countries. This is no different in Libya. Russian media companies with heavy links to Russian PMCs have “leveraged acquisitions of regional media outlets and social media influence operations for a blend of propaganda, misinformation, and disinformation operations about the Libyan conflict” since 2015, according to the CSIS. A firm linked to Mr Prigozhin is reported to have been at the centre of these acquisitions, with media companies such as Al-Jamahiriya TV now placed under Russian control. This represents a severe political influence throughout Libya and a coordinated plan with Libyan officials, with Mr Prigozhin playing a significant role.
An assessment of the type of contracts accepted by Russian PMC’s shows us that Russia had planned to maximise economic benefit in Libya from the beginning. Much of the contracts regarding the security of oil and gas facilities had been obtained with haste in 2015 and 2016, and often as soon as the facilities had fallen under LNA control. Furthermore, it is reported that General Haftar had promised the Kremlin economic benefits in exchange for its security of oil and gas terminals, as well as ports, suggesting this had been an orchestrated plan designed at the height of Russian politics. Even when disregarding these direct economic benefits, the contracts gifted to Russian PMCs in the Libyan oil industry provided Russia with a direct influence over short-term decision making. Russian PMCs gained extensive power over the decision making of Libyan oil companies, such as the Libyan National Oil Company, through partaking in the control of ports and terminals along the Mediterranean Sea, an area in which Russia sees as essential to its geopolitical aims and to its relations with Turkey.
The continuation of PMC involvement occurs as Libya seeks to reconstruct its various industries, ranging from energy to transport, with Russia seeing this as a prime opportunity to increase their geopolitical and economic ties with the continent. On the 15th April, 2021, Mr Putin stated that Russia would “continue to promote the inter-Libyan political process in order to achieve long-term stability in Libya, strengthen its sovereignty and unity, and ensure progressive socioeconomic development”. Thus, the long-term ambitions of Russia were confirmed by the words of Mr Putin himself. That same day, Russian Prime Minister Mikhail Mishustin, and the interim Prime Minister of Libya, Abdul Hamid Dbeibeh, had met to discuss several investment opportunities in Libya. It is likely that these investment opportunities have been presented because of the support provided by Russian PMCs in managing and securing Libya’s military and economic power.
A further demonstration of the Kremlin’s long-term economic ambitions regards its printing and input of dinar notes into the Libyan economy. In 2015, state-owned Russian printing company Goznak began to print cash for the LNA, without informing the central bank, with the printed money amounting to $10 billion dollars since 2016. This proved to be essential in the financial stability of the LNA and the power of General Haftar. However, since 2020 the Kremlin has decreased its printing of dinar banknotes as the United Nations attempts to restructure and rebuild Libya’s economy. An overhaul of Libya’s financial system will facilitate Russia to heighten its business ties with Libya, and thus the Kremlin views the health of the Libyan economy as economically relevant to Russia’s future ambitions in the region.
These developments in Libya signify a much grander foreign policy ambition crafted at the heart of the Kremlin. It is not just Libya where the power and influence of PMCs, with the discreet control of the Kremlin acting in the background, are taking hold of its economy with both hands, but in developing nations across the globe. The PMCs of Russia have been operating throughout the African continent in the CAR, Madagascar, and Sudan, and throughout South America and the Middle East in Venezuela and Syria, and even in the back garden of NATO in Ukraine. Thus, as more information regarding these PMCs is released, alongside the involvement of the Kremlin, it is becoming clear that Mr Putin and his administration have recognised the utilisation of PMCs as a path towards economic stability and as a firm foreign policy commitment throughout the 21st century.