Where Does Russia Go From Here?

2014 Russian Asset Volatility and Economic Collapse:

• One month after the annexation of Crimea, the ruble became the world's most volatile currency, surpassing the volatility seen during the 1998 Russian default.
• Simultaneously, the MOEX (Moscow Exchange) index became the world's most volatile stock index, creating a dual deterrent to trade and investment.
• The combination of Western sanctions and a 50% collapse in oil prices caused Russian asset values to plummet, marking Russia as the worst-performing emerging market in 2014.

2015 Economic Stabilization and Recovery Trends:

• By late 2014, ruble volatility had diminished to the point where the currency became the least volatile globally, signaling a rebound in asset values.
• Russian bond and stock markets have been recovering since the beginning of 2015, placing Russia in a stronger position one year post-sanctions.
• Russian food retail businesses reported approximately 30% year-over-year growth as sanctions on imports replaced European/American goods with higher-margin local produce.
• Ruben Vardanyan notes that the Russian stock market is irrelevant to 90% of the population, as most live in a ruble zone and do not participate in equity markets.

Geopolitical Identity and Strategic Roles:

• Panelists discuss the sentiment that Russia has "lost an empire but not yet found a role," struggling with a national identity oscillating between Europe and the Far East.
• Susan Eisenhower argues the West lacks a consistent long-term strategy, driven more by politics than expert-led policy regarding arms control and geopolitics.
• David Bonderman asserts that demonizing Putin is a policy failure; he acknowledges Putin's initial modernization efforts that improved the tax regime and facilitated foreign investment.
• Ruben Vardanyan outlines four strategic choices for Russia: rebuild the empire (economically unsustainable), join the EU (rejected in the 2000s), align with China (unacceptable to Russian military due to Far East security concerns), or disintegrate.
• Carl Theodor Engel notes that Russia has attempted to join NATO twice (under Yeltsin and Putin) and was rejected in favor of "junior partnership" models that Russia viewed as humiliating.

Western Policy Failures and the "Humiliation" Narrative:

• The West is criticized for failing to fulfill promises made to Boris Gorbachev regarding no NATO expansion eastward after German reunification.
• Carl Theodor Engel attributes significant escalation to NATO's "severe mistakes," including the rapid push for Ukraine and Georgia's membership and the US withdrawal from the ABM Treaty.
• Post-9/11 US policies of regime change and preemption (e.g., Iraq, color revolutions in the South Caucasus) contributed to a Russian perception of Western hostility and strategic encirclement.
• Ruben Vardanyan highlights that the US and Europe failed to uphold agreements regarding Viktor Yanukovych, creating a trust deficit that exacerbated the crisis.

Business Outlook and Investment Logic:

• Investors view Russia as attractive due to depressed asset prices and higher margins in sectors like food retail, provided sanctions compliance is managed.
• Ruben Vardanyan cites BP as a prime example of high profitability in Russia despite conflict, noting that margins and operational ease often outweigh volatility risks.
• Vardanyan identifies a historic transition in Russia: the emergence of the first generation of post-1917 wealthy Russians facing succession planning and the need for philanthropy.
• The Russia-China economic alignment is described by David Bonderman as "entirely unnatural," as Russian culture and aspirations remain oriented toward the West, creating long-term strategic risks for Moscow.

Nuclear Security and Arms Control Risks:

• The panel warns of a "new Cuban Missile Crisis" dynamic, with Russia on high alert and 15-minute decision times for nuclear strikes.
• Susan Eisenhower emphasizes that a potential NATO membership for Ukraine would place the alliance's nuclear deterrent within 350 miles of Moscow, creating an existential security threat.
• Ruben Vardanyan points out that tactical nuclear weapons are now part of Russian public discourse due to the lack of confidence in conventional military defense capabilities.
• David Bonderman suggests the administration establish clear, EU-backed benchmarks for de-escalation and the removal of sanctions, noting current thresholds have been repeatedly breached.

Information Warfare and Domestic Dynamics:

• Ruben Vardanyan observes that Russian state media systematically interprets all global events as anti-Western to maintain regime stability and create a necessary external enemy.
• A survey of Russian public opinion following the downing of Malaysia Airlines Flight MH17 showed 100% belief in Western involvement, contrasting with international investigations.
• Vardanyan counters that Putin's popularity has remained consistently high (above 70% for years), suggesting the conflict is driven by geopolitical strategy rather than a need to rescue falling approval ratings.
• The panel stresses the importance of maintaining people-to-people contact and educational exchanges to prevent long-term societal isolation between the US, Europe, and Russia.

Proposed Strategic Actions:

• Susan Eisenhower recommends appointing a special US envoy with the authority to engage both the Kremlin and diverse EU member states (specifically distinguishing between the Baltic states, Germany, and Southern Europe).
• David Bonderman urges the deployment of Congressional delegations to the Russian Duma to foster direct interaction and reduce reliance on hostile rhetoric.
• Carl Theodor Engel highlights Angela Merkel's pivotal role in seeking a balance between security concerns and the economic necessity of Russian energy cooperation.
• Ruben Vardanyan advocates for a multi-pronged approach involving the creation of a Special Envoy for Europe/CIS, arms control benchmarks, and a recognition that Russia cannot be economically sustainable in isolation.