Russia's new muscle

Convulsions in the US and Europe have given Russia an open door to advance its military superiority – particularly in the air space and the Mediterranean Sea.

Russia might have lost the cold war but as a low debt country it is coming back with a vengeance.

The return of Russian power is among the long-term security ramifications caused by the convulsions in Europe and the Middle East plus the mistakes of the US.

More ramifications will start to emerge in the next 12 months.

But over the weekend the ‘Russia is Back’ syndrome hit the headlines in two events. First, the Dutch parliament rejected the American Joint Strike Fighter. The Netherlands are coming close to an election and whether the rejection will follow through to action will depend on the outcome. Nevertheless, the Netherlands are facing the same problem as all other JSF partners – in tough economic times the aircraft’s costs are ballooning. And they will rise even further as more countries pull out.

More seriously, it is now clear that the JSF will not be able to match the Russian/Indian PAK-FA T-50, the aircraft giving Russia air superiority in Europe.

Russian/Indian air superiority will extend to Australia because Indonesia has ordered a massive 180 of the Russian jets to be delivered by 2024 – about the time we might have JSF aircraft. Given that the JSF is a lemon, Indonesia, with Russia’s backing, will have air superiority over Australia if we don’t wake up (Australia's mission critical, October 4, 2010).

The Indonesians are not happy about the proposed US defence base in Australia. Tony Abbott is very wise to make Indonesia the first overseas visiting post for his government (China also has an aircraft which will be superior to the JSF).

Against a background of looming air superiority over NATO, Russia is taking steps to make sure it continues with a strong naval presence in the Mediterranean.

Russia, and not Europe, is going to bail out EU member Cyprus. The Russians want a number of things, led by access to Cyprus’s deep Mediterranean port. The Russians currently have a naval base at Tartus in Syria which has become high risk given the Syrian civil war. In addition, Russia has close financial connections with Cyprus, which is the home of many Russian companies who have exposure to the troubled Cyprus banks (Self-interest drives Russia to loan to Cyprus, July 9).

But we should not forget that a major factor that brought down Communist Russia was low oil prices. Part of the current Russian wealth has come from the recent high energy prices. As America develops its gas reserves then the cost of global oil/gas energy will stay down for an extended period.

Shale and coal gas give the US a second chance, which it can exploit by merging the JSF development with its mothballed but brilliant aircraft, the F22. But politics in the US move very slowly, which is an enormous advantage for Russia.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles