TIME U.S.

Watch How the AK-47 Came to Be ‘Made In America’

In early 2015, a U.S.-based company got the green light to start producing what is perhaps the world's most recognizable assault rifle

TIME U.K.

Putin’s ‘Mafia State’ Under Examination in U.K. Inquest Into Spy’s Radioactive Death

BRITAIN-RUSSIA-BRITAIN-POLITICS-SPY-CRIME-FILES
Former Russian intelligence officer Alexander Litvinenko is seen on Sept. 14, 2004. Martin Hayhow—AFP/Getty Images

The High Court in London opens a 10-week hearing into the 2006 death of the former Russian intelligence officer and MI6 informant Alexander Litvinenko

It took Alexander Litvinenko 23 painful days to die. It has taken another agonizing 2,987 days for the British government to open a public inquiry into his murder, a process that cannot deliver justice to the victim, his widow Marina or son Anatoly, but may at least provide an official account of events leading up to his death. As he lay dying after ingesting radioactive polonium-210, Litvinenko blamed the Kremlin. The Kremlin rejected blame. Britain for eight years dragged its heels, reluctant to push for answers that might complicate its relations with Russia.

Yet the evidence expected to unfold at the High Court in London over the next 10 weeks is likely to reveal not only an intricate web of relationships between spies and diplomats, Kremlin loyalists and dissidents, but also a startlingly simple truth. Russia, in the era of Vladimir Putin, has rarely proven susceptible to diplomacy.

That realization may finally have helped to sway Britain’s Home Secretary Theresa May from her 2013 refusal to hold a public inquiry. An inquest into Litvinenko’s death had already been abandoned apparently for fear of causing a breach with Moscow. In a letter explaining her decision to block the inquiry the coroner had recommended in its place, May cited concerns over the potential impact on “international relations.” Last summer, however, May revealed a change of heart. Her announcement of a public inquiry came less than a week after the shooting down of Malaysia Airlines Flight MH17 over eastern Ukraine, an act Ukraine (and much of the rest of the world) attributed to pro-Russian separatists. Russia accused Ukraine. Whitehall sources told the BBC that the timing of the May’s announcement was “a coincidence.” That may be true, but Britain has substantially toughened its stance toward Russia since then, as have other Western countries including the U.S. where on Monday an alleged Russian spy was arrested in New York.

Litvinenko’s strange tale speaks to a world in which the public handshakes between country leaders count for little. In 1998 he broke ranks with his then employer, Russia’s spy service the FSB, alleging a state-sanctioned plot to assassinate the Kremlin-insider-turned-critic Boris Berezovsky (whose eventual death, last March, raised questions, attracting an open verdict). Litvinenko sought asylum in the U.K. in 2000 and forged close links with Berezovsky and other figures unpopular with the Kremlin, including the investigative journalist, Anna Politkovskaya, slain just weeks before Litvinenko. But he also retained friendships with some of his former colleagues and during a meeting at a London hotel with two such men, Andrei Lugovoi and Dmitry Kovtun, allegedly drank tea spiked with polonium-210. Britain’s Crown Prosecution Service named the pair as suspects in the killing, respectively in 2007 and 2012. Both men deny involvement and Russia has continued to refuse their extradition.

The polonium apparently left traces that enabled the Metropolitan Police to trace its progress around London. On the first morning of the public inquiry, Robin Tam QC, counsel to the inquiry, revealed that there may have been an earlier attempt to poison Litvinenko in October 2006 that failed. The inquiry will seek to reveal many other hitherto invisible trails and connections but key parts of the evidence will also be heard in secret. Britain may be more willing to risk Kremlin anger than it used to be, but details of Litvinenko’s later work as an informant to the British foreign intelligence service MI6 will not be publicly aired, and other matters deemed diplomatically sensitive will also be considered in private.

Despite these strictures, Litvinenko’s widow Marina, who campaigned for the inquiry, told broadcaster Sky News that she hopes the process will lead to the truth. The inquiry will weigh alternative theories: might Litvinenko have died at the hand of agencies other than the Russian state, such as organized criminals, Chechen separatists, Berezovsky’s associates, the British secret services or even by his own hand? Ben Emmerson, the counsel representing Marina Litvinenko, gave an opening speech to the inquiry forcefully rejecting these scenarios. “The startling truth, which is going to be revealed in public by the evidence in this inquiry,” he said, “is that a significant part of Russian organized crime is organized directly from the offices of the Kremlin. Vladimir Putin’s Russia is a mafia state.” Marina Litvinenko told Sky News a key part of the truth is already clear: “I know my husband was killed, I saw how it happened. It was a torture. He died a long 23 days in front of me, in front of his son, in front of his friends.”

TIME North Korea

North Korean Leader Kim Jong Un May Visit Moscow, Russia Says

North Korean leader Kim Jong Un delivers a New Year's address
North Korean leader Kim Jong Un delivers a New Year's address in this January 1, 2015 photo released by North Korea's Korean Central News Agency (KCNA) in Pyongyang. KCNA—Reuters

Kim hasn't made an official foreign visit before

Kim Jong Un could visit Moscow this May in his first foreign visit as North Korea’s leader, according to statements from Russian foreign minister Sergei Lavrov.

Lavrov said on Wednesday that an invitation to attend the 70th anniversary celebrations of the Soviet Union’s victory over Nazi Germany received a “positive” response from North Korea, the Wall Street Journal reports.

He would not elaborate further, however, and the North Korean government has not yet commented on the proposed trip.

Kim, who had sent an envoy to Russian President Vladimir Putin in November, has not made an official foreign trip since assuming power in 2011.

[WSJ]

TIME russia

Putin Critic Protests House Arrest By Cutting Off Tracking Bracelet

RUSSIA-POLITICS-JUSTICE-NAVALNY-VERDICT
Russian anti-Kremlin opposition leader Alexei Navalny speaks as he attends the verdict announcement of his fraud trial at a court in Moscow on December 30, 2014. Dmitry Serebryakov—AFP/Getty Images

"The bracelet with some effort has been cut off with kitchen scissors"

A leading protest figure in Russia’s beleaguered opposition camp defied the terms of his house arrest on Monday, announcing that he had severed a tracking device that he was ordered to wear by a Russian court.

Alexei Navalny posted a picture of a severed bracelet on his blog, Reuters reports.

“I refuse to comply with the requirements of my illegal detention under house arrest,” Navalny wrote on the blog, which draws up to 1 million readers a month. “The bracelet with some effort has been cut off with kitchen scissors.”

Navalny was handed a suspended sentence in late December on charges of embezzling 30 million rubles from two firms. Russian authorities launched an investigation against Navalny in 2010, shortly after he exposed evidence of corruption in Russia’s state-owned corporation amounting to $4 billion in fraudulent payments.

TIME World

These Are the Top 10 Geopolitical Risks of 2015

Protesters hold a banner as they march during a demonstration against the visit of Germany's Chancellor Angela Merkel on April 11, 2014 in Athens.
Protesters hold a banner as they march during a demonstration against the visit of Germany's Chancellor Angela Merkel on April 11, 2014 in Athens. Milos Bicanski—Getty Images

TIME foreign affairs columnist Ian Bremmer provides a guide to the global storylines of the year, beginning with an unstable Europe

International stories rise and fall so quickly in today’s media. On Monday, it’s civil conflict in Ukraine. On Tuesday, it’s the rise of the Islamic State of Iraq and Greater Syria (ISIS). By Wednesday, the headlines are on to something else. Amid the global whiplash, it’s easy to lose sight of the larger picture. So as the new year begins, it’s useful to take a broader look at where these stories are headed—and to track the next wave of market-moving surprises in international politics.

Every January Eurasia Group, the political risk consultancy I founded and oversee today, publishes Top Risks, a roundup of the geopolitical trends we consider most likely to change our world in the coming year. This ranking reflects our forecast of which global storylines are most likely to play out over the next 12 months, which will have biggest impact on the markets and politics—and where we can expect surprises.

In 2015, political conflict among the world’s great powers is in play more than at any time since the end of the Cold War. U.S. relations with Russia are now fully broken. China’s powerful President Xi Jinping is creating a new economy, and the effects will be felt across East Asia and the rest of the world. Geopolitical uncertainty has Turkey, the Gulf Arab states, Brazil and India hedging their bets.

But the year’s top risk is found in once placid Europe, where an increasingly fractured political environment is generating new sources of conflict.

1. The politics of Europe

European economics aren’t as bad as they were at the height of the eurozone crisis in 2012, but the politics of the continent are now much worse. Within key countries like Britain and Germany, anti-EU political parties continue to gain popularity, undermining the ability of governments to deliver on painful but needed reforms. Friction is growing among European states, as peripheral governments come to increasingly resent the influence of a strong Germany unchecked by weak France or absent Britain. Finally, a resentful Russia and an aggressive ISIS will add to Europe’s security worries.

2. Russia

Sanctions and lower oil prices have weakened Russia enough to infuriate President Vladimir Putin, but not enough to restrain his actions. Moscow will continue to put pressure on Ukraine, and as a result, U.S. and European sanctions will tighten. As Russia’s economy sags, Putin’s approval ratings will depend increasingly on his willingness to confront the West. Western companies and investors are likely targets—on the ground and in cyberspace.

3. The effects of China slowdown

China’s economic growth will slow in 2015, but it’s all part of Xi’s plan. His historically ambitious economic reform efforts depend on transitioning his country to a consumer-driven economic model that will demand levels of growth that are lower, but more sustainable. The continuing slowdown should have little impact inside China. But countries like Brazil, Australia, Indonesia and Thailand, whose economies have come to depend on booming trade with a commodity-hungry China, will feel the pain.

4. The weaponization of finance

For the moment, the American public has had enough of wars and occupations, but the Obama administration still wants to exert significant influence around the globe. That’s why Washington is weaponizing finance on a new scale. The U.S. is using carrots (access to capital markets) and sticks (varied types of sanctions) as tools of coercive diplomacy. The advantages are considerable, but there is a risk that this strategy will damage U.S. companies caught in the crossfire between Washington and targeted states. Transatlantic relations could suffer for the same reason.

5. ISIS, beyond Iraq and Syria

ISIS faces military setbacks in Iraq and Syria, but its ideological reach will spread throughout the Middle East and North Africa in 2015. It will grow organically by setting up new units in Yemen, Jordan, and Saudi Arabia, and it will inspire other jihadist organizations to join its ranks—Ansar Bayt al Maqdas in Egypt and Islamists in Libya have already pledged allegiance to ISIS. As the militant group’s influence grows, the risk to Sunni states like Saudi Arabia, the United Arab Emirates and Egypt will rise.

6. Weak incumbents

Feeble political leaders, many of whom barely won reelection last year, will become a major theme in 2015. Brazil’s Dilma Rousseff, Colombia’s Juan Manuel Santos, South Africa’s Jacob Zuma, Nigeria’s Goodluck Jonathan and Turkey’s Recep Tayyip Erdogan will each face determined opposition and formidable obstacles as they try to enact their political agendas.

7. The rise of strategic sectors

Global businesses in 2015 will increasingly depend on risk-averse governments that are more focused on political stability than on economic growth, supporting companies that operate in harmony with their political goals and punishing those that don’t. We’ll see this trend in emerging markets, where the state already plays a more significant role in the economy, as well as in rogue states searching for weapons to fight more powerful governments. But we’ll also see it in the U.S., where national security priorities have inflated the military industrial complex, which now includes technology, telecommunications and financial companies.

8. Saudi Arabia vs Iran

The rivalry between Shiite Iran and Sunni Saudi Arabia is the engine of conflict in the Middle East. Given the growing reluctance of Washington and other outside powers to intervene in the region, increasingly complex domestic politics within these two countries and rising anxiety about the ongoing negotiations over Iran’s nuclear program, we can expect Tehran and Riyadh to use proxies to fuel trouble in more Middle Eastern countries than ever in 2015.

9. Taiwan/China

Relations between China and Taiwan will deteriorate sharply in 2015 following the opposition Democratic Progressive Party’s landslide victory over the ruling Nationalist Party in local elections this past November. If China decides that its strategy of economic engagement with Taiwan has failed to advance its ultimate goal of reunification, Beijing might well backtrack on existing trade and investment deals and significantly harden its rhetoric. The move would surely provoke public hostility in Taiwan and inject even more anti-mainland sentiment into the island’s politics. Any U.S. comment on relations between China and Taiwan would quickly increase resentment between Beijing and Washington.

10. Turkey

Lower oil prices have helped, but President Erdogan has used election victories in 2014 to try to sideline his political enemies—of which there are many—while remaking the country’s political system to tighten his hold on power. But he’s unlikely to win the authority he wants this year, creating more disputes with his prime minister, weakening policy coherence and worsening political unpredictability. Given the instability near Turkey’s borders, where the war against ISIS rages, that’s bad news. Refugees from Syria and Iraq are bringing more radicalism into the country and adding to economic hardship.

TIME russia

Exclusive: Gorbachev Blames the U.S. for Provoking ‘New Cold War’

Former Soviet leader Mikhail Gorbachev in Berlin, Nov. 8, 2014.
Former Soviet leader Mikhail Gorbachev in Berlin, Nov. 8, 2014. Sean Gallup—Getty Images

"It’s America calling the shots in everything!” the former Soviet leader tells TIME

In the offices of Mikhail Gorbachev, still sharp at 83 and plainspoken as ever, the walls are lined with photos from his travels as the leader of the Soviet Union and, in the years after its demise, as a living icon of the Cold War. One picture shows him with his late wife Raisa standing arm-in-arm with Mickey Mouse and Minnie Mouse. In another frame he wears a cowboy hat and jeans as he stands beside Ronald Reagan, the U.S. President who famously branded Gorbachev’s country an “evil empire” in 1983. These portraits, like many others in his Moscow office, betray Gorbachev’s affection for his former American adversaries.

But in the course of this year those feelings seem to have been subsumed in a rising sense of animosity, as Russia and the West enter what Gorbachev calls a new Cold War. “Are we in the middle of a new Cold War? Indeed we are,” he tells TIME in an interview last month at the Moscow branch of the Gorbachev Foundation, the international advocacy group he founded in 1991, when he was forced to resign from his post as President due to the dissolution of the Soviet Union.

MORE: Vladimir Putin, TIME Person of the Year runner-up

The elder statesman, who was named TIME’s Person of the Year in 1987 and ‘Man of the Decade’ two years later, is not the first to declare the start of a new Cold War this year. Russia’s annexation of Crimea in March has caused officials and pundits around the world to warn that the West’s efforts to isolate Russia have opened a dangerous gulf between them. But the roots of the present standoff run deeper than this spring, says Gorbachev, and the blame for it lies with the Americans.

In the years that followed the Soviet collapse, the West “tried to turn us into some kind of backwater, a province,” he says. “Our nation could not let that pass. It’s not just about pride. It’s about a situation where people speak to you however they want, impose limitations, and so on. It’s America calling the shots in everything!”

For a country whose leaders remember the years when Russia was a superpower, the American dominance of global affairs has always been a taunting reality and a constant source of frustration. Instead of treating Russia as an equal partner, the West tried to “push us out of politics,” says Gorbachev, most recently during the revolution that brought a pro-Western government to power in Ukraine early this year. Vladimir Putin’s reaction to that uprising sought to claw back some of the influence Russia had lost, and for that the Russian President has earned Gorbachev’s admiration.

“Putin started acting on his own,” says Gorbachev, referring to the annexation of Crimea from Ukraine. “And his position was in the interests of the majority.”

Even a year ago such praise would have been hard to imagine coming from Putin’s Soviet predecessor. In the spring of 2013, Gorbachev attacked Putin for persecuting opposition activists and silencing dissent. He called that year’s crackdown an “attack on the rights of citizens” during an interview with the BBC, and gave Putin the following advice: “For goodness sake, you shouldn’t be afraid of your own people…What people want and expect their president to do is to restore an open, direct dialogue with them.”

Such criticism has since vanished from Gorbachev’s public remarks, much as it has from the rhetoric of many of Putin’s former critics. The annexation of Crimea sent the President’s approval ratings soaring to record highs of well over 80% this year, driven upward by a jingoistic sense of pride even as Western sanctions eat into the value of the Russian currency and push its economy toward recession. Gorbachev now seems willing to forgive Putin for his authoritarian tendencies as long as he works to restore the “great power” status that Russia lost.

“There are still elements of autocracy, of authoritarianism” in Russia today, he tells TIME. “But I’ll say this. The manual control of authoritarianism was also needed to overcome the situation that our friends, our former friends and allies, created for Russia by pushing us out of geopolitics.”

MORE: Russia’s fifth column

The new East-West divide does evoke a sense of foreboding in Gorbachev. In particular Putin’s recent warnings that Russia is a “nuclear power,” and that foreigners would be wise “not to mess with us,” all feel like reminders of the arms race that kept the world on the edge of a catastrophic war as Gorbachev climbed the ladder of the Soviet Communist Party to become its last General Secretary. “People are talking again not only about a new Cold War but a hot one,” he says. “It’s as if a time of great troubles has arrived. The world is roiling.”

But that does not mean that Putin should back down in the face of Western sanctions. The man who pursued reforms at home and peace talks with the West in the late 1980s now feels it must be the Americans who learn a sense of humility toward Russia and stop resisting its rightful role as a global power. “It’s hard to belittle the Russians,” says Gorbachev. “We know our worth.” And if the U.S. does start to seek a new thaw in relations with Russia, he has a fresh bit of advice to offer Putin going forward: “I learned that you can listen to the Americans, but you cannot trust them,” he says. “When they get an idea to do something, they’ll turn the world onto a different axis to get it done.”

Still, as our interview winds down, Gorbachev seems to snap back into the mode of reconciliation that won him the Nobel Peace Prize a quarter century ago. “We have to return to dialogue. We have to stop this process,” he says warily. “We have to return to what we started with at the end of the Cold War.” But so far, he admits, the world is moving in the opposite direction.

Read next: Exclusive: Putin Cut Ukraine Criticism From Speech Ahead of Peace Talks

TIME person of the year

How International Leaders Are Doing in TIME’s Person of the Year Poll

Modi, Merkel, Putin and more

Vote Now for TIME’s Person of the Year.

This time last year, Narendra Modi was the chief minister of the western Indian state of Gujarat and the opposition Bharatiya Janata Party’s (BJP) Prime Ministerial candidate. He was also among the world leaders and politicians featured in TIME’s Person of the Year readers’ poll for 2013, finishing at fourth place with 14% of the vote. This year, Modi, who got the top job after the BJP stormed to victory in India’s national elections in May, is leading the readers’ poll with over 10.7% of the votes cast as of Thursday afternoon.

With nine days to go until voting closes, here’s a look at the world leaders who fared best in the 2013 poll—and where they stand this year.

Abdel Fattah al-Sisi, Egyptian President

2013 rank: 1. Current rank in 2014 poll: 38th

Abdel Fattah al-Sisi was still sporting a generals’ epaulettes on his shoulders when TIME readers crowned him the winner of the 2013 Person of the Year poll. By January, the general—who ousted Egypt’s first democratically elected leader, Mohamed Morsi, last summer—had become a field marshal. And soon the uniform was replaced with a dark suit as al-Sisi ran for the presidency, eventually winning the May elections by a wide margin.

As we noted when he spoke to TIME in September, his rule has been widely criticized for crackdowns on Morsi’s supporters in the Muslim Brotherhood and on free speech and journalists. Talking about Morsi’s ouster in 2013, al-Sisi defended the military’s action, saying “it was the Egyptian people who demanded that change of identity.”

Should Abdel Fattah al-Sisi Be TIME’s Person of the Year? Vote Below for #TIMEPOY

Recep Tayyip Erdogan, Turkish President

2013 rank: 2. Current rank in 2014 poll: 40th

When he finished second in the 2013 poll, Erdogan was Turkey’s Prime Minister, a job he would have had to give up next year because of term limits set by his ruling Justice and Development, or AK, party. And so, after over a decade as P.M., he contested what were the country’s first direct presidential elections, promising to add some executive heft to the largely ceremonial office. Voters responded in droves. Despite facing anti-government protests during his final term as Prime Minister, he comfortably swept to victory in August, cementing his position as the most powerful Turkish leader in decades. He has also found himself a new home: a sprawling palace four times the size of Louis XIV’s extravagant digs in Versailles and, according to reports, no less sumptuous, with green granite inlays and washrooms decked in silk wallpaper. Originally intended for the Prime Minister, it reportedly cost more than $600 million to erect.

Should Recep Tayyip Erdogan Be TIME’s Person of the Year? Vote Below for #TIMEPOY

Narendra Modi, Indian Prime Minister

2013 rank: 4. Current rank in 2014 poll: 1st

Modi was one of the strongest performers in the TIME readers’ poll last year. At the time, the controversial Indian politician was already widely tipped to lead his party to victory and unseat the ruling Congress Party-led coalition government in elections in May, 2014. Few, however, predicted the scale of his eventual triumph, with the BJP securing the first parliamentary majority for a single party in 30 years. Promising to revive India’s slowing economy, Modi tapped into disenchantment with the Congress, the grand old party of Indian independence which, by the end of its latest term in office, was mired in a series of high-profile corruption scandals and struggling to boost growth.

Should Narendra Modi Be TIME’s Person of the Year? Vote Below for #TIMEPOY

Bashar al-Assad

2013 rank: 10. Current rank in 2014 poll: 25th

With the Syrian conflict now in its fourth year, Assad continues to hold on to power in Damascus, even as vast swathes of the country fall into the hands of extremist militants. On Wednesday, Russia reaffirmed it’s support for the Assad regime, with the Russian Foreign Minister Sergei Lavrov saying: “We share the view that the main factor driving the situation in the Middle East is the terrorist threat. Russia will continue supporting Syria … in countering this threat.”

Should Bashar al-Assad Be TIME’s Person of the Year? Vote Below for #TIMEPOY

Other leaders from the 2013 poll who also feature in this year’s survey include the Russian President Vladimir Putin, who came 11th last year and currently stands at 5th place, and the German Chancellor, Angela Merkel, who came 15th last year and current stands at 16th place.

Since 1927, TIME has named a person who for better or worse has most influenced the news and our lives in the past year.

The Person of the Year is selected by TIME’s editors, but readers are asked to weigh in by commenting on any TIME Facebook post that includes #TIMEPOY, tweeting your vote using #TIMEPOY, or by heading over to TIME.com’s Person of the Year voting hub, where Pinnion’s technology is recording, visualizing and analyzing results as they are received. Votes from Twitter, Facebook and TIME.com’s voting hub are pooled together to create the totals displayed on the site. You can see the results of the poll and vote on your choice for person of the year here.

TIME person of the year

Narendra Modi Leads TIME’s Person of the Year Poll

Narendra Modi
Prime Minister Narendra Modi of India waves to the crowd as he arrives to give a speech during a reception by the Indian community in honor of his visit to the United States at Madison Square Garden, Sept. 28, 2014, in New York. Jason DeCrow—AP

India's leader is well ahead of the Ferguson, Mo., protesters and Russia's Vladimir Putin

Vote Now for TIME’s Person of the Year.

Narendra Modi, the newly elected Indian prime minister, has a significant lead in TIME’s 2014 Person of the Year polls, with 11.1% of the vote as of Wednesday evening. The leader of the world’s largest democracy has raised hopes among Indians that he’ll invigorate the country’s economy and tear down the bureaucratic red tape that has slowed development.

Should Narendra Modi Be TIME’s Person of the Year? Vote Below for #TIMEPOY

The Ferguson, Mo., protesters now stand at 8.8% as of late Wednesday, edging out Russian President Vladimir Putin (5.9%), who was TIME’s Person of the Year in 2007, and the youngest Nobel Peace Prize winner ever, Malala Yousafzai (5%).

The earlier bump for the protesters came amid violent unrest in the St. Louis suburb and subsequent demonstrations that rippled across the U.S. Thousands expressed solidarity with slain 18-year-old Michael Brown’s family following the grand jury announcement not to indict police officer Darren Wilson for causing his death. Crowds from New York to Los Angeles gathered and chanted the rallying cry, “Black lives matter.”

Since 1927, TIME has named a person who for better or worse has most influenced the news and our lives in the past year.

The Person of the Year is selected by TIME’s editors, but readers are asked to weigh in by commenting on any TIME Facebook post that includes #TIMEPOY, tweeting your vote using #TIMEPOY, or by heading over to TIME.com’s Person of the Year voting hub, where Pinnion’s technology is recording, visualizing and analyzing results as they are received. Votes from Twitter, Facebook and TIME.com’s voting hub are pooled together to create the totals displayed on the site. You can see the results of the poll and vote on your choice for person of the year here.

TIME europe

German Chancellor Says Russia’s Actions Are Unjustifiable

Chancellor Angela Merkel in the lower house of parliament Bundestag in Berlin, Nov. 26, 2014.
Chancellor Angela Merkel in the lower house of parliament Bundestag in Berlin, Nov. 26, 2014. Stefanie Loos—Reuters

Angela Merkel appears to be taking a tougher stance against Vladimir Putin

German Chancellor Angela Merkel Wednesday suggested she is prepared for a drawn-out confrontation with Russian President Vladimir Putin over the Ukraine crisis

“We need patience and staying power to overcome the crisis,” Merkel told German lawmakers in a speech to Berlin’s parliament. She added that economic sanctions on Russia “remain unavoidable” as long as government forces continue to battle pro-Russian separatists in eastern Ukraine, Bloomberg reports.

Merkel continued that while the crisis may have been triggered by Russia’s concerns over the impact of Ukraine’s free trade agreement with the European Union, “none of this justifies or excuses Russia’s annexation of Crimea.”

Russia’s actions, she said, interrupt “the peaceful international order and breach international law.”

MORE: Russia wants a “100% guarantee” that Ukraine won’t join NATO

The German chancellor’s speech to parliament follows an address Merkel made in Australia Monday, during which more openly critical of Putin than in the past, suggesting her patience with Putin is running out after months of negotiations. Merkel and Putin met during the G20 conference, but that reportedly did not go well for either leader.

[Bloomberg]

TIME russia

Russia’s Lackluster Economy Means Putin Simply Can’t Afford a New Cold War

Vladimir Putin
Russian President Vladimir Putin prepares to toast with ambassadors in the Alexander Hall after a ceremony of presentation of credentials by foreign ambassadors in the Grand Kremlin Palace in Moscow, Russia, Wednesday, Nov. 19, 2014. Alexander Zemlianichenko—AP

Moscow needs the West

One of the axioms of global geopolitics is that a country can project power only as far as its economic might allows. There is good reason why the United States, by far the world’s largest economy, has been the dominant force in all things political and military for the past 60 years. And we can see China now rising to superpower status on the back of its spectacular economic ascent.

Vladimir Putin should take note. As Russia’s president attempts to reassert his nation’s clout in Europe, he is doing so on an ever shakier economic foundation. The question for Putin going forward is whether his stumbling economy can support his geopolitical ambitions. The answer is anything but clear.

Russia’s economy was struggling even before Putin’s adventurous foray into Ukraine. The country had been one of the high-fliers of the developing world, so much so that Goldman Sachs included Russia in its BRICs — the emerging economies that would shape the economic future — along with Brazil, India and China. But a feeble investment climate, endemic corruption and excessive dependence on natural resource exports eventually laid Russia low. Growth last year sunk to only 1.3%, down from the 7% to 8% rates experienced a decade ago.

Since Putin’s intervention in Ukraine, Russia’s economic situation has worsened severely. GDP inched upwards only 0.7% in the third quarter from a year earlier, and the International Monetary Fund is forecasting mere 0.2% growth for all of 2014. Sanctions imposed by the U.S. and European Union in the wake of Putin’s intervention in Ukraine have blocked some major Russian banks and companies from accessing financing in the West, starving them of much-needed foreign capital. As a result, the value of the Russian currency, the ruble, has deteriorated by 30% against the dollar so far this year, routinely hitting new record lows along the way.

In a recently released study, the European Bank for Reconstruction and Development predicted that Western sanctions would help push Russia into a mild recession in 2015. Sanctions, the bank noted, “negatively affected business confidence, limited the ability of companies and banks to access international debt markets and contributed to an increase in private capital outflow.”

Meanwhile, Putin’s countermeasures have made matters worse. His decision to ban the import of some foodstuffs from the West has caused prices for fresh produce and other necessities to rise. Combined with the weakening ruble, that’s pushing up inflation, which bites into the pocketbook of the average Russian family. Moscow’s economy minister recently said that he expects inflation to exceed 9% by early 2015. The nasty mixture of a depreciating currency and escalating prices have forced the central bank to hike interest rates, which will act as a further drag on growth.

Headwinds from the global economy are making matters even worse. Tumbling oil prices spell bad news, both for overall growth and the financial position of the government, which is reliant on tax revenues from its energy industry to fund the budget. In 2013, oil and gas accounted for 68% of Russia’s total exports, while duties on those exports, combined with taxes on mining, accounted for 50% of the federal government’s revenue.

Putin so far hasn’t flinched. Instead, he has been scrambling to evade Western sanctions and find new sources of exports and investment in Asia. On the sidelines of the Asia-Pacific Economic Cooperation summit, held in Beijing this month, Russia agreed to a deal to supply even more natural gas to China, on top of a $400 billion pact inked earlier this year.

That “pivot” to Asia will take time to bear fruit, however. Right now, none of the negative factors damaging Russia’s economic prospects look likely to turn positive any time soon. “We expect the stagnation trend to continue and potentially accelerate next year, exacerbated by lower oil prices, tighter monetary policy and continued uncertainty on the geopolitical front,” noted Barclays economist Eldar Vakhitov in a recent report.

Still, Putin’s economic woes haven’t yet translated into political problems. The Russian public appears to be patriotically rallying around Putin’s aggressive foreign policy and setting aside concerns about the economic fallout. In the latest poll conducted by the Levada Center, a Moscow-based independent research organization, an amazing 60% of the respondents said they believed that Russia was heading in the right direction, up significantly from 40% a year earlier. Putin’s approval rating stands at an even more astronomical 88%.

What the future may hold is another issue. A good part of Putin’s political success has been based on his record of improving people’s welfare, but with no relief in sight for Russia’s economic troubles, it may only be a matter a time before the general populace begins to feel the pinch more sharply. Nor can Putin ignore his economy’s need for foreign investment and technology to upgrade industry and create jobs. He may eventually find himself facing a critical choice — maintaining his foreign policy goals or softening his stance towards the West out of economic necessity.

Recall that the Soviet Union collapsed, after all, because its economy could not sustain its international policies. Putin has to watch that history doesn’t repeat itself.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser