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Excerpts from the JRL E-Mail Community :: Founded and Edited by David Johnson

A banana republic with oil

Kremlin and Saint Basil'sWhile the news that Vladimir Putin would run for the presidency appeared at first to show that the government was united, the departure of Finance Minister Alexei Kudrin blew that idea out of the water. Kudrin's ouster revealed a number of economic policy disagreements, notably over the increase in military spending announced by President Medvedev last week.

Kudrin has been a strong advocate of cutting it, so it was clear who Medvedev criticized when he defended military spending at the meeting where he called for Kudrin to quit.

"We can't manage without defense expenditure," Medvedev said. "[They should be] expenditures worthy of the Russian Federation ­ not some banana republic." On one level, what motivated these com- ments was a desire by Medvedev (and by extension, Putin) to balance the interests of the siloviki and Russia's military-industrial complex with those of the oligarchs and the more pro-free market officials.

But forgetting the political infighting for a moment, let's think about this statement: Is Russia in danger of becoming a "banana republic" if it scales back its defense spending? The answer would seem to be no. With Russia's huge nuclear arsenal and more than a million men under arms, the switch to a smaller professional army would almost certainly be more efficient.

The first problem, as always, is corruption. There is just too much money sloshing around in military spending contracts ­ and too many fingers in too many pies.

But there's another problem too. There are many European countries that have managed to develop their economies and maintain peaceful re- lations with their neighbors without large standing armies and nuclear weapons. But these countries didn't rely so heavily on oil, gas and other natural resources ­ which one of Russia's neighbors, in particular ­ China ­ desperately needs. And that's a neighbor which is building up its armed forces in a big way.

So in a way, Medvedev was right: Russia is indeed a banana republic ­ if for bananas we substitute oil, gas and metals. And without massive (and non-productive) military spend- ing that prevents Russia diversify- ing its economy, Russia's natural resources could eventually fall into the hands of the Chinese.

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