Thursday Essay: Gray Swans, Regime Collapse, and the Kremlin

In a Substack essay this week, Charles Hugh Smith defined a gray swan event as "an event that is known and possible to happen, but which is assumed to be unlikely to occur." The most recent example is the fall of the Bashar al-Assad regime in Syria last weekend. People are right to marvel at how quickly it came undone but only after nearly 14 years of civil war. And there had been very little movement since March 2020.

Nevertheless, a gray swan appeared from nowhere two weeks ago, and 11 days later, Assad was history.

"The term derives from Nassim Taleb's black swan theory," Smith goes on, "which describes an event that is unlikely but unknown."

And Another Thing: On the whole, I found Smith's essay worthwhile reading despite a few major disagreements. But he certainly provided food for thought on some domestic issues that conservatives like me aren't always eager to examine. Keep all that in mind should you decide to read him.

What seems to attract the gray swans is what Smith terms "the polycrisis" — a culminating series of crises that undermine "the status quo's moral, financial and material bases."

Syria's once-hot civil war went cold for almost five years until it suddenly turned hot again. A confluence of tangentially related events — the third year of the Russo-Ukraine War, Hamas' Oct. 7 terror invasion of Israel, the destruction of Iran's air defenses in October, the recent decapitation and paralysis of Hezbollah, Turkish President Recep Erdoğan's longstanding neo-Ottoman ambitions, and some smart opportunism by various Syrian rebel groups — almost appeared to conspire against the Assad regime.

Who could have predicted how the end of Assad was so near or how it would play out? When HTS rebels broke out of their Idlib enclave two weeks ago, Assad's forces initially did all the right things. After Aleppo fell to HTS in a surprise offensive, Assad's air force slowed the rebel advance with airstrikes (with an assist from Russian jets), while the army formed a defensive line north of Hamah. But then the line broke, and for Assad, everything went to hell so quickly that it almost seemed inevitable — but only in retrospect.

"From the perspective of polycrisis, the collapse of Syria's regime could be a harbinger of future collapses, not a one-off event," Smith continues. "The reason for this is that many of the keystone/linchpin elements of polycrisis are visibly global in nature: they affect every region and nation-state, regardless of size or location." Going further, "Sudden collapses of key regimes tend to unleash forces that destabilize other regimes, or act as triggers for regimes to take actions which are initially viewed as protective which end up imploding the regime from within."

What then might topple Vlad the Bad?

I'll stop that line of thought right here because nobody knows and nobody can know — and I won't get into speculative scenarios. That's mostly because they'd read like bad anti-Putin fanfic and partly because of the unpredictable nature of gray swan events. Instead of indulging in pure speculation, let's look at actual "facts on the ground" that could prove the proximate causes of the unpredictable. 

Before we get into all the gory details, I'd remind you that today's essay is not meant to be predictive. Gray swan events are, by their nature, unpredictable. Besides, Putin's regime enjoys strengths that Assad's didn't. We'll discuss those today, too. 

Now for those gory details.

The Telegraph's Ambrose Evans-Pritchard published a piece this week headlined, "Putin’s regime may be closer to a Soviet collapse than we think," compiling the many challenges facing the Kremlin. Some are demographic and can't be pinned on anyone, some are due to Western sanctions, and the rest fall squarely at Putin's feet. But the point isn't to blame or demonize anyone but rather to spot and identify elements of a potential polycrisis. 

While the Russian economy held up well enough during the war's first two years, "this third year has become harder," with the Russian central bank jacking up interest rates to 21% "to choke off an inflation spiral." Sergei Chemezov, head of the giant Rostec defense contractor, warned, "If we continue like this, most companies will essentially go bankrupt. At rates of more than 20%, I don’t know of a single business that can make a profit, not even an arms trade."

More, also courtesy of Evans-Pritchard:

• Some 800,000 of the young and best-educated have left the country. The numbers slaughtered or maimed in the meat grinder are approaching half a million.
• The shortage of IT workers is around 600,000. The defense industry has 400,000 unfilled positions. The total labor shortage is nearly five million.
• There is a shortage of qualified specialists: engineers, technologists, developers, and designers. There are practically no colleges and technical schools that train personnel for the industry.
• Total export earnings from all fossil fuels were running at about $1.2 billion a day in mid-2022. They have fallen for the last 10 months consecutively and are now barely $600 million. 
• Oil tax revenues slumped to $5.8 billion in November, based on a Urals price averaging near $65 a barrel. That price could fall a lot further. Russia is facing an incipient price war with Saudi Arabia in Asian markets.
• Russia can get around technology sanctions, but its systems are configured to Western semiconductors. These chips cannot easily be replaced by Chinese suppliers, even if they were willing to risk US secondary sanctions, which most are not.

To cover for these shortfalls, Putin has raided the National Wealth Fund. "Its liquid assets have fallen to a 16-year low of $54bn," Evans-Pritchard reports, and "gold reserves have dropped from 554 to 279 tonnes over the last 15 months." Much of what is left in the NWF consists of illiquid items that can't easily be converted into needed hard currency, like Moscow's stake in Aeroflot Airlines.

Speaking of which, Reuters reported two weeks ago on the struggles in Russian civilian aviation:

In the year before invading Ukraine, Russia added 54 new commercial aircraft to its fleet - 27 from Airbus, three from Boeing and 24 Russian-made Sukhoi Superjets - for airlines including flag carrier Aeroflot (AFLT.MM), opens new tab, S7, Red Wings, Rossiya, and Ural, ch-aviation data shows.

In the nearly three years since, it has added just 11 new planes, all of them Superjets.

Production of Russia's new MS-21 airliner, being made by Rostec, has already been pushed back to 2025-2026 from 2024.

The irony is that with wages booming (due to Russia's labor shortages and hot wartime production), the demand for recreational air travel has never been greater. Granted, that's not the worst problem in the world to have, but it is indicative of how three years of heavy fighting in Ukraine have warped the economy. 

"Ukraine is slowly losing the three-year conflict on the battlefield. Russia is slowly losing the economic conflict at a roughly equal pace," Evans-Pritchard writes, and "The Kremlin’s oil export revenues are too low to sustain a high-intensity war, and nobody will lend Vladimir Putin a kopeck."

The parallels to Wilhelmine Germany in 1917-18, "which had run out of skilled manpower and was holed below the waterline after three years of Allied blockade," are too obvious to ignore.

Calling Putin's credibility "shattered" in the Middle East, Evans-Pritchard adds this:

“The limits of Russian military power have been revealed,” said Tim Ash, a regional expert at Bluebay Asset Management and a Chatham House fellow.

Turkey is now master of the region. Turkish forces had to step in to rescue stranded Russian generals. Even if Putin succeeds in holding on to his naval base at Tartus – a big if – this concession will be on Ottoman terms and sufferance.

That brings us back to Smith and his warning that "the collapse of Syria's regime could be a harbinger of future collapses." Almost overnight, Russia went from being the dominant player to Syria and, by Syrian-based logistics, having a forceful presence in the mineral-rich parts of Africa, to all of that being at risk.

In 1964, Soviet premier Nikita Khrushchev was ousted in part for a much smaller loss of face during the Cuban Missile Crisis. 

It seems so daunting for the Putin regime when you put all the negatives in one place, but Putin's plusses are considerable, too.

And Another Thing: When it comes to deposing Putin, be careful what you wish for. The world dodged a bullet in 1991 when the Soviet Union peacefully threw itself on Ronald Reagan's ash heap of history. The situation in the former USSR could have devolved into nuclear-armed warlordism — a possibility that seems more likely should the Russian Federation fall apart. Also, the Russo-Ukraine War proved the deadly folly of giving up nuclear weapons in exchange for empty promises from Moscow (or from Washington, for that matter). If the world could negotiate its way out of a Russian collapse, it would be a near-miracle.

Putin's greatest strength is himself. He's an expert at playing even a weak hand both abroad and at home. Leaders trying to organize an effective democratic opposition to Putin's rule have either been bought out, co-opted, jailed, exiled, or assassinated. There simply aren't any credible alternatives to Putin. Certainly, none that would be any less dangerous and likely more so. 

In his quarter century in power, Putin has faced just one kinda-sorta coup attempt. That was Wagner Group mercenary chief Yevgeny Prigozhin's abortive — protest? rebellion? coup? — in June 2023. It's impossible to say if even Prigozhin knew what he hoped to accomplish when he marched his one little column of mercenaries north from Rostov toward distant Moscow before the semi-demi-putsch quickly fizzled out. If it was a coup attempt, it was one written by Gilbert & Sullivan. 

If somebody is going to topple Putin — which I would caution against once more — they're going to have to be much more serious about it than Gilbert & Sullivan's comic-opera model of a modern major-general. 

Finally, a word of thanks for America's robust constitutional system that has, for more than two centuries, shielded us from gray swan events. We only rarely worry about potential calamities that hang like Damocles's sword over Moscow, Beijing, and the capital city of every authoritarian regime in history. The 2020 "election" — if you'll allow me to still call it that — made many people wonder if our system had been corrupted beyond repair. Last month, the people peacefully rose up and proved that it hadn't. 

If you had asked me just a few weeks ago if the gray swans circled over this country, I'd have said, "Yes, since March of 2020," but I don't see them now. But that doesn't mean they can't return.

Recommended: A Republic, If You Can Keep It

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