Consider that in late-August, the U.S military intercepted six Russian jets off the Alaskan coast, which underpinned major Russian war games involving air and navy assets in the Bering Sea, simulating among other things numerous practice missile launches. The incident prompted NORAD to increase surveillance and heighten readiness. Elsewhere in the Black Sea region, two Russians planes engaged in dangerous brinkmanship by crossing a B-52 bomber’s nose less than 100 feet away, causing significant afterburner turbulence that endangered the American crew. Footage released by the U.S. military of the Russian Su-27 Flankers captures the irresponsibility of the intercept. In another recent signalling episode, four American military personnel were injured when their patrol vehicle was side-swiped by a Russian military armored vehicle in eastern Syria, raising the spectre of an accidental escalation. If operating across three military theatres was not enough, confrontations between US and Russian space assets in early 2020, along with the curious case of Cosmos 2542 and Cosmos 2543 on USA 245, are not to be overlooked or taken lightly. 

Against this backdrop, the upcoming KAVKAZ 2020 exercise slated to take place between September 21- 26 is yet another instance of Moscow attempting to project power and military might. KAVKAZ 2020, meaning Caucasus in Russian, is the culmination of four rotational exercises that began with ZAPAD 2017, with subsequent exercises VOSTOK 2018 and TSENTR 2019 having already taken place. Collectively these exercises are a designed to assess the theatre readiness in each of Russia’s four military districts: Western, Eastern, Central, and Southern. The final edition will involve an estimated 150,000 military personnel as well as 26,000 pieces of military equipment, including 500 tanks and 300 planes, which will be used to conduct military drills across Rostov, Volgograd, Astrakhan, Crimea, Adygea, Chechnya, Dagestan, and South Ossetia. With much international diplomatic attention being heaped on Asia, an underlining feature of the exercise is Moscow’s desire to remind the world of its longstanding influence in Eurasian security. Navy drills being held in the Black Sea, which make up a small component of the overall exercise, have received major Western media attention due to it potential implications to pose as a cover, a la maskirovka technique, for Russian personnel to reactivate tensions and cause mischief in the Kherson and Odessa oblasts as well as the Donbass. When assessing the value of KAVKAZ in domestic terms, the longstanding stubborn threat of radical Islamic terrorism, stemming from the North Caucasus, still represents an existential threat to Moscow and the safety of citizens across the Russian federation.

According to Russian Defence Minister Sergei Shoigu, nine foreign states will be participating, including China, Pakistan, Armenia, Azerbaijan, Iran, Belarus, Turkey, and certain Central Asian states. Personnel from the breakaway provinces in of Abkhazia and South Ossetia in Georgia are also scheduled to participate. While conducting joint training and improving interoperability, KAVKAZ 2020 also represents a high-profile staging ground for participating nations to exhibit their military technology and hardware.

Although the involvement of Turkey, a NATO Ally, would stand out the most from the list of a Russian organized exercise, the decision of India to withdraw is more telling. Although originally confirmed to participate, New Delhi’s tensions with Beijing are no doubt the actual reason, not COVID-19 fears, for India’s withdrawal. The discharge of weapons by both sides along the disputed Himalayan border, the first time this has happened since 1962, led to a meeting between Chinese and Indian foreign ministers in Moscow last week, where both parties agreed to disengage their respective forces. It is notable that Subrahmanyam Jaishankar, Minister of External Affairs for India, is also the former ambassador to China, adding another layer of diplomatic intrigue 

While Russia continues to yoke itself to China on many fronts, the idea of India drifting closer within a Western orbit would be hard to stomach for the Kremlin given the cordial ties of the two countries during the Cold War and today. The potential for further diplomatic decoupling with Russia, and a weakening of the BRICS and Shanghai Cooperation Organization (SCO) platforms, could potentially arrive with India looking to firm up its position against China through the revamped Quad format, which includes Australia, Japan, and the United States. Another factor dissuading India from participation would be the possibility of interlocked military training with archrivals Pakistan.

Another intriguing element to keep watchful eyes over is the joint participation of Azerbaijan and Armenia, which in July engaged in an almost month-long series of clashes that risked spiralling into a regional conflict. While Armenia counts itself a member of the Collective Security Treaty Organization (CTSO) and is steeled to Russia for support, on the other side, Azerbaijan benefits from strong ethnic and diplomatic ties to Turkey, somewhat equalizing the military scales. Distrust purveys relations between Yerevan and Baku so no bilateral breakthrough at KAVKAZ to reset relations should be expected.  

The final angle to remain aware of is the involvement of Belarus, which remains under heightened international scrutiny amidst the crackdown on protestors who are calling for fresh elections. Now more than ever President Lukashenka needs allies and to show his fidelity to President Putin, who remains in an advantageous position to execute some longstanding requests, most notably the successful execution of the Union State. A face-to-face between President Lukashenka and President Putin took place on 14 September in Sochi that resulted in Russia extending Belarus a €1.25 billion loan. No doubt, the onus to repay the debt will faller sooner than later on the Belarusian President, who could be forced to make military concessions to the Kremlin like the permanent installation of Russian forces and bases on Belarussian territory. In parallel with KAVKAZ, the annual Slavic Brotherhood military drills will take place with Russian and Belarusian servicemen from September 14-25 at the Bretsky training range. Missing from the trilateral drill is Serbia, which has frozen all foreign participation for six months.

Although Russia has made the best of the current crisis abroad and profited from this uncertainty, the Kremlin does not hold a monopoly on this tactic. With so many antagonistic diplomatic moving parts at KAVKAZ, keeping order for the duration of the exercise as well as at subsequent multinational platforms will require all of Moscow’s best efforts if they are to keep this string of foreign policy wins going. 

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After the end of the Nagorno-Karabakh War in 1994, Russia began to supply weapons to both Armenia and Azerbaijan. It has, however, greatly favored Armenia in its attempt to maintain an equilibrium that it could manipulate to its own advantage. The Global Militarization Index of the Bonn International Center for Conversion ranked Armenia as the third most militarized country in the world in 2018. 

Military relations between Russia and Armenia date from 1992, immediately after the Soviet Union disintegrated. An intergovernmental agreement from 1997 commits them to assist one another in case of military threat. Russia has greatly favored Armenia and has been its main supplier of weapons and weapons systems since that time.

Azerbaijan, on the other hand, is compelled to pay the significantly elevated “normal” international prices charged by Russian arms export bureaucracies. And Azerbaijan is compelled to pay in hard currency, whereas in reality Armenia “pays” for Russian arms with targeted loans from Russia itself in Russian currency.

Perhaps most significant, a Russian-Armenian agreement on military cooperation in 2013 provides for Armenia to buy Russian military equipment at Russian domestic prices. Hikmet Hajiyev, the head of the foreign policy affairs department within the Presidential Administration of Azerbaijan, has accused the government of Armenia of illicit weapons trade and reselling to terrorist groups, weapons that it has purchased from Russia at artificially low prices. 

Yerevan has shown unhappiness over Moscow’s arms sales to Baku but can do nothing about them.  Russian officials have suggested that such sales are required in order to ensure the military balance in the region.  Also, of course, such sales are a revenue generator for the Russian State budget.  Russia supplied two-thirds of Azerbaijan’s weapons imports between 2013 and 2017.  

Moscow supplies Yerevan with weapon systems, such as mobile missile systems, that it does not supply to Baku. As senior Russian lawmaker Leonid Kalashnikov, Chair of the State Duma’s Committee for CIS, Eurasian Integration, and Compatriots’ Affairs, recently told reporters that Russia sells Armenia more weapons and especially more kinds of weapons than it sells to other countries. 

An important factor in this is the embargo on arms sales to Azerbaijan implemented by the United States and Europe. There are different justifications for this, but they all reach back eventually to the “request” in the early 1990s by the Organization for Security and Cooperation in Europe (OSCE) that all arms sales to all parties to the conflict should be halted. Yet Russia, a co-chair of the OSCE’s “Minsk Group” charged with resolving the conflict, has failed to honor this request from the beginning.

As a consequence of all this, Azerbaijan has turned to other arms exporters for advanced military systems especially including multiple-launch rocket systems and other missile systems. Western countries only limit their own influence and enhance the power of Russia’s coercive diplomacy by refusing to consider arms sales to Azerbaijan.

The Armenian dependence on Russian arms has had very definite geopolitical results. Armenia began to negotiate an Association Agreement (AA) with the European Union in 2010. It was close to being finalized in autumn 2013, but Russia put an end to the process when Armenia announced its decision that year to join the Eurasian Economic Union. This made the Deep and Comprehensive Free Trade Agreement (DCFTA), which would have been part of the AA, impossible.

Armenia’s President Serzh Sargsyan announced his country’s readiness to proceed with the AA minus the DCFTA, but this never happened. In 2017 he signed instead a Comprehensive and Enhanced Partnership Agreement having, despite its name, a much reduced scope. Armenia’s dependence on Russian arms sales was not a small influence that produced this geopolitical result.

Armenia is a member of the Russian-led Collective Security Treaty Organization (CSTO) and hosts more than 3,000 Russian soldiers at a military base near Gyumri, as well as an air base near Yerevan. In addition, Russia is integrating Armenian armed forces into the structure of its Southern Military District, including the formation of joint Russian-Armenian ground forces.

Nor is this the only indicator of Russian influence in Armenia. The Armenian energy sector is heavily dominated by Russian companies (up to 80 percent according to some estimates), and Russian banks equally dominate the Armenian financial sector.   

Russian deliveries of military equipment and ammunition to Armenia were enhanced just after the military clashes in 2016, and Russia has delivered new military equipment and ammunition to Azerbaijan, even during the tense period of the most recent hostilities. In the days surrounding the most recent clashes, from July 17 to August 4, there were no fewer than seven flights from Russia transporting arms to Armenia. As Georgia had refused permission for the overflight of its territory by Russian military transports, the planes took the roundabout path from Russia over Kazakhstan, Turkmenistan, Iran, and finally into Armenian airspace.

It seems likely that Russia has underestimated the effect of its overt tilting toward Armenia in the recent hostilities, upon Azerbaijani political opinion. In practice, Moscow risks creating the impression in Baku that it can no longer count on Moscow and that Ankara is its only true regional friend in facing up to Yerevan.

Robert M. Cutler is a Fellow at the Canadian Global Affairs Institute.

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Following stormy exchanges between Russia and the U.S. over alleged Russian actions during the US presidential election, international attention has once again turned to a Russian Federation which seems to be successfully flexing its muscles overseas. But while headlines may reveal political successes for Moscow, the business news remains much more mixed. Russia’s economic prospects remain inextricably linked to the priorities of its political elite and their defensive world view. It also remains overdependent on energy as a means of earning revenue and operating under politicized tax and justice systems which deter outside investment.

Nonetheless the country seems to have ridden out the turbulent days of 2014-15, when international condemnation over Russian actions in Ukraine was at its height. Speculation is growing that President-elect Donald Trump will lift some US sanctions on Russia once he reaches office, which would reduce pressure on European states such as France, who have also pushed for sanctions to be relaxed. With the possible election of more sympathetic European leaders in 2017, such as François Fillon, Russia could gain temporary relief from external pressures. But equally important will be the price of oil, which has jumped comfortably for Moscow since an OPEC agreement in late 2016. If oil remains above $40 a barrel, then Russia can expect a good 2017 – but if the agreement with OPEC countries should fall apart, there could be problems if prices plunge.

Background

A Russian energy surge in 2016. Russian oil production in October 2016 reached a post-Soviet high despite international sanctions, thanks to a combination of low-cost production, careful tax measures, and a high US dollar. The performance suggests that Moscow successfully adapted to a low oil price environment, with major Russian oil firms Rosneft and Lukoil, who together account for almost 50 percent of Russian oil production, both increasing capital expenditure in 2016. Rosneft increased its capex by 33 percent in the first half of 2016, compared with the same period in 2015. Russia was also helped by the fact that it sells most of its oil under long-term agreements, which means buyers must purchase from it for periods of up to five years or more. This cushioned the economy against the plunge in prices in 2014, and against international sanctions.

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