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Russia enters 2008 in the strongest geopolitical position it has known since the Cold War's end. This is one section of the Annual Forecast 2008.

Russia enters 2008 in the strongest geopolitical position it has known since the Cold War’s end. The rampant decay of its military has largely been halted, new weapons systems are beginning to be brought on line, the country is flush with petrodollars, its debt has vanished, the Chechen insurgency has been suppressed, the central government has all but eliminated domestic opposition, the regime is popular at home, and the U.S. military is too locked down to make more than a token gesture to block any Russian advances.

Yet Russia faces challenges to match its power. Chinese pipelines to Kazakhstan and Turkmenistan (to be constructed in 2008) threaten to divert the energy that until now could only flow northward and serve Russian purposes. NATO and the European Union occupy Russia’s entire western horizon and are flirting with expanding their memberships. Rising defense modernizations in Asia are forcing Russia to deal with two military fronts — something at which Moscow never really succeeded during Soviet times. And the European Union plans to separate Kosovo from Serbia, making a mockery of the Kremlin’s efforts to keep the province attached. Finally, while Russia’s military is improving, it still faces massive challenges — ranging from a bloated and unskilled conscription force to mass corruption within the officer corps that siphons away a sizeable minority of resources the Kremlin is allocating to the military.

If Russia is to secure its long-term future in the face of a rising China and ever-expanding EU and NATO, 2008 must be the year of action.

The former Soviet Union region will have three main developments in 2008. First, the consolidation that began in Russia’s energy sector in 2003 will culminate. This will be the year that state giants Rosneft and Gazprom swallow up — whether formally or through “alliances” — most of the remaining independent players in the country’s energy industry.