U.S. Intelligence Concerned with Russia

In a report delivered to the U.S. Senate Intelligence Committee on 2/5/08, Mike McConnell, Director of National Intelligence, devoted considerable attention to Russia. His concerns included potential use of Russia's increasing financial, energy and military influence for political goals and capability to conduct cyber attacks against U.S. interests. In addition, the report includes a briefing on a number of national trends in politics, economics and military activity in Russia. The full report is available online, but here are the relevant excerpts:

"[Issues include] concerns about the financial capabilities of
Russia, China, and OPEC countries and the potential use of
their market access to exert financial leverage to achieve
political ends.

...

We assess that nations, including Russia and China, have
the technical capabilities to target and disrupt elements of the
US information infrastructure and for intelligence collection.
Nation states and criminals target our government and private
sector information networks to gain competitive advantage in
the commercial sector.

...

In March, Russia is set to reach what many anticipated would
be an important milestone—the first on-schedule change in
leadership since communism and the first voluntary transfer
of power from one healthy Kremlin leader to another. That
milestone has been clouded, however, by President Putin’s
declared readiness to serve as prime minister under his
hand-picked successor, Dmitry Medvedev, a move that raises
questions about who will be in charge of Russia after Putin’s
presidential term expires in May. Coming at a time of uncertainty
about Russia’s direction, the Medvedev-Putin “cohabitation”
raise questions about the country’s future and the implications
for Western interests. While many of the essential features of the
current system are likely to endure, including weak institutions,
corruption, and growing authoritarianism, we will be alert for
signs of systemic changes such as an indication that presidential
powers are being weakened in favor of a stronger prime minister.

We judge the Russian economy will continue to expand
under a new leadership, although at a slower rate than over the
last eight years, given capacity constraints, the slow pace of
institutional change, the impact of real ruble appreciation, and
developments in the international economy. Negative
longerterm demographic challenges loom and investment will
remain a significant constraint, particularly in the energy sector.
Other elements of Russian national power—from trade and
energy, to diplomatic instruments and military and intelligence
capabilities—are on a path to grow over the next four years.
For example, Russia is positioning to control an energy supply
and transportation network spanning from Europe to East Asia.
Aggressive Russian efforts to control, restrict or block the
transit of hydrocarbons from the Caspian to the West—and to
ensure that East-West energy corridors remain subject to
Russian control—underscore the potential power and influence
of Russia’s energy policy.

The Russian military has begun to reverse a long, deep
deterioration in its capabilities that started before the collapse of
the Soviet Union. Although determined that defense spending
not harm Russia’s economic performance, Putin has been
committed to increases for defense commensurate with GDP
growth that has averaged just under 7 percent this decade. By
2006 the military had significantly increased the number of
high-readiness units from 1999 levels, ramped up ground forces
training—including mobilization exercise activity—and begun
to man its high-readiness units with longer-term “contract”
personnel rather than conscripts.

Moscow also is making more use of its strengthened armed
forces. A growing number of exercises with foreign militaries
and an increased operational tempo in the North Caucasus
Military District, often focusing on potential Georgian
contingencies, are designed primarily to demonstrate regional
dominance and discourage outside interference. Russia has
used widely publicized missile launches and increased longrange
aviation (LRA) training flights to the Pacific, Atlantic,
and Arctic Oceans to showcase Russia’s continued global reach
and military relevance.

The military still faces significant challenges, and recent
activity does not approach Soviet era operations. Demographic,
health problems, and conscription deferments erode available
manpower. Strategic nuclear forces remain viable, but Russia’s
defense industry suffers from overcapacity, loss of skilled and
experienced personnel, lack of modern machine tools, rising
material and labor costs, and dwindling component suppliers.

...

The other states of Eurasia remain in a state of flux.
Unresolved conflicts in the separatist Georgian regions of
Abkhazia and South Ossetia will remain potential flashpoints
even if Russia—in response to Western recognition of
Kosovo—does not follow through with its implicit threat to
recognize the two regions as independent. President
Saakashvili’s reelection in January will help renew his
democratic credentials and leadership mandate.

Elsewhere in the Caucasus, the stalemated Nagorno-
Karabakh conflict between Azerbaijan and Armenia continues
to produce dozens of casualties annually along the Line-of-
Contact. Moreover, Russia’s recent suspension of its
Conventional Forces in Europe obligations could lead to similar
suspensions by Azerbaijan and Armenia and a subsequent arms
race.

...

High energy prices and escalating demand for oil and
natural gas, also has resulted in windfall profits for producers.
OPEC countries earned an estimated $690 billion from oil
exports last year, nearly three times the revenues earned in
2003. The increased revenues also have enabled producers like
Iran, Venezuela, Sudan, and Russia to garner enhanced
political, economic and even military advantages and
complicated multilateral efforts to address problems such as the
tragedy in Darfur and Iran’s nuclear program.

...

...We also see a sharp rise in Russia’s investment abroad, much
of it driven by Russian energy companies. Moscow is using the
power of its energy monopoly to ensure that East-West energy
corridors remain subject to Russian influence.

...

High food prices in several countries, including Russia, China,
India, and Vietnam, are forcing governments to engage in
market distorting practices such as banning food exports,
increasing subsidies, or fixing prices: Food prices are likely
to be an issue in several upcoming elections, particularly
Pakistan."