Putin's paranoid bear sharpens its claws

Russians are again living in a dictatorship, hemmed in by corruption and chaos that prevents legitimate business from taking shape

In attacking Georgia, Putin will hope to have rammed home the message that he remains Russia's strongman – to be challenged at your peril

STANDING in the sunshine outside the gold-domed Cathedral of Christ the Saviour in downtown Moscow this week, a group of young people stood holding flickering candles in plastic cups, proclaiming solidarity against "Georgian Brutality". Turning her fresh face to the setting sun, Marina Katayeva, a 30-year-old doctor, beamed with pleasure at the news of Russian tanks smashing their way deep into Georgian territory: "The superpower showed that she was able to defend her people."

This demonstration was not all it seemed. It was not spontaneous, but organised by the Kremlin – the only kind of protest that can be safely held in Russia these days. But if the spontaneity of the protest was fake, the emotions were real. For these young people, like millions of Russians, the sight of tanks smashing their way deep into Georgia is the cause of wild celebration. "We really showed them," said Georgy Kryuchkov, slamming a fist into his palm before he drank from a can of imported Tuborg at an outdoor table of a hotdog stand. "We could have done it sooner, but OK, we did it later."

One reason for the outpouring of emotion is that most of the media is controlled by the Kremlin. Coverage of the fighting in Georgia is one-sided, portraying the Georgians as horrific murderers and Russia's own soldiers as saints with no mention of the atrocities recorded by human rights groups. "Russia only moved its troops into South Ossetia when they understood it was self-defence," says Nina Kalashnikova, apparently unaware that this move included bombing raids on the Georgian capital, invasion of Georgia proper and attacks by the navy miles from the enclave. "By the look of it America doesn't behave as a friend."

But in the Kremlin, behind the triumph, there is paranoia. The euphoria of the military success masks the terror of a country that believes it is under attack from all sides – by the Europeans, by America, by China and by Islamic fundamentalism – in a ring stretching around its borders. "I think it is obvious with this ring around Russia that America is supporting the Baltic States, with Poland, Georgia, putting in their guided missile system," said Kalashnikova. Such was the growing anxiety last week, Russia went as far as threatening Poland with nuclear attack for allowing the US to build part of its missile defence shield in the country.

In all of this Vladimir Putin is still the boss – in giving the presidential job to his friend Dmitri Medvedev he was able to maintain control of the levers of power. Having crushed the independent media, re-nationalised the oil and gas industry and destroyed the independence of the law courts, Russians are again living in a dictatorship, hemmed in by corruption and chaos that prevents legitimate business and a proper middle class from taking shape.

And while Russia has an oil fund of more than $100bn (£54bn), none of that has been used to shore up its crumbling schools and hospitals, fix its disintegrating roads or combat its TB-laced prisons. Instead of taking the blame for all this, Putin has deflected it, blaming the outside world, and principally the United States, for all Russia's woes. In this he has fallen back on his KGB training inherited from Stalin, who encouraged a spirit of paranoia that remains to this day. As a journalist working in Russia I was regularly asked if I was a spy. When I denied it, heads would shake. "But of course," they would say. "A true spy would always deny his mission."

Russia's elite even feel hemmed-in on home soil as well. The Orthodox church is losing converts to livelier forms of Christianity. The birthrate is plummeting as hard-up couples avoid having extra mouths to feed. American films swamp the cinemas, McDonald's beats home-grown burger restaurants.

The response, very often, is to lash out, as seen in Georgia. Russia has also cut gas supplies to Ukraine and oil to the Baltic states to try to keep them in line. In possibly the most chilling outburst, it last week apparently threatened to attack Poland with nuclear weapons after Warsaw agreed to join America's missile defence shield. Although Colonel-General Anatoliy Nogovitsyn later said he was misquoted, his statement caused worldwide alarm.

Further east, Kazakhstan fears Russia plans to annex a chunk of the oil and gas rich state, while Japan is agitating for Russia to finally end occupation of the oil-rich Kurile Islands that dates from the Second World War. Even at the top of the world there is tension. After Russia planted its flag on the seabed at the Arctic circle, Canada is building a fleet of eight ice-breaking patrol craft to fend off a Russian threat. But while the rest of the world sees this as Russian expansionism, Russians see evidence that the rest of the planet is out to get them. For Russians labour under the twin weight of superiority and inferiority complexes.

Superiority, because, until the end of the Soviet Union, Moscow was the centre of a true superpower, the Russians happy to have other states including Georgia in positions of subservience. And inferiority because since the USSR's collapse, Russians have been hit by one humiliation after another. Much of the Soviet Union's territory – including its most productive agriculture – was dissolved into independent states. And those states, be they the Baltics, Ukraine or Georgia, have rushed to embrace the West, rejecting alliance with the Russian Bear.

Meanwhile, the vast profits Russia now earns from oil and gas have not been felt by the ordinary people, or even the economy as a whole. Seventeen years after the fall of communism, Russia, a country with the population of Britain, France and Italy combined, is unable to manufacture a single exportable car, or mobile phone, or airliner, or even a running shoe to compete with the West.

And for all their patriotism, Russians themselves spurn their own kind. In Moscow, the best restaurants specialising in all-Russian cuisine have foreign customers but few Russians – the pronounced snobbism of Muscovites dictates that they dine at French, Chinese or Spanish restaurants, drink Finnish vodka and smoke American cigarettes. And those with money move to London or Geneva, and holiday in the south of France rather than the Black Sea.

Similarly, the contradictions of the Kremlin's policy over Georgia are glaring, but most Russians choose not to dwell on them. Why, for instance, if they believe South Ossetia has the right to set up an independent state, did Chechnya not have the same right? And if Russia is so upset at American influence in its neighbouring states of Georgia and Ukraine, why does Moscow not try to woo them – they are, after all, supposed to be independent states able to choose their own friends.

Putin may feel he has little room for manoeuvre. He won office through the ballot box, but gained true power by taking on and beating the oligarchs – the billionaire businessmen who divided up Russia's wealth in the chaotic aftermath of the fall of communism. The mightiest oligarch, Mikhail Khodorkovsky, is now sitting in a Siberian jail. The second, Boris Berezovsky escaped to Britain to fret and plot. The other barons have fallen into line, but are ready to pounce should Putin show any weakness.

In attacking Georgia, Putin will hope to have rammed home the message that he remains Russia's strongman – to be challenged at your peril. His attack on Georgia has given Russians the sort of feel-good factor other nations get from sporting triumphs: "It's good we kicked some Georgian ass because it means we've kicked some American ass," said IT executive Timothy Kulikov, explaining the mood of many of his fellow countrymen.

There are nevertheless voices in the wilderness. Fully 36% of Russians told pollsters last week that the invasion of Georgia was a mistake. Fearful of the consequences they would rarely voice this dissent on such numbers without anonymity.

Russia's last independent radio station, Echo Moskvi, blamed everyone – the Kremlin, the Georgians, the South Ossetians and the West for the horrors in Georgia and the carnage that followed. And some Russians doubt that smashing the lightly armed Georgian forces means their army is ready to stand up to the United States. "They all are thinking to portray it as a success," says Kulikov. "I think for sure the Russian army is in the worst condition since the time of the early Tsars."

Meanwhile, the suffering continues in Georgia. In a mountain refugee camp outside Tbilisi, a return to the lives they left behind in South Ossetia is at best a distant prospect. Zalina Tsodniashvili, her two teenage sons and her husband sleep on four rickety cots in one room in a dreary three-storey concrete building left over from the Soviet era. But she said a worse torment was not their discomfort, but the uncertainty about what had become of her mother. Every displaced person in her building has suffered, she said, and the building houses hundreds of them.

She was on a visit to help her ill mother with household chores when the attacks began last weekend. "When they bombed, I grabbed the little ones and ran. My mother didn't follow," Tsodniashvili, 32, said. She did not dwell on the irony that her mother is an ethnic Ossetian, one of the people the Russian government said its military was sent to protect, or that she herself is half-Ossetian, half-Georgian.

"There's not one family that doesn't have Georgian and Ossetian in their family in some way. They're all mixed." Nor did she expect her mother's ethnicity to offer protection. "How could they possibly know?" Tsodniashvili asked. "They are soldiers. Who could tell them that an Ossetian woman lived there?"

Tsodniashvili was lucky in at least one respect: she found her husband three days after they fled the fighting in South Ossetia separately. The only injury either had suffered was a cut to her husband's foot. Now infected and swollen, the wound was inflicted as he ran from Russian planes overhead. "When they started to bomb, when there wasn't a soldier remaining, we said we have to go. There is nothing left," said Bakuri Kirkinashvili, 40, Tsodniashvili's husband.

They were reunited in front of the mayor's office in the centre of Tbilisi and then brought up winding roads through forested mountains to the shelter a few miles from the city. They say they hope that it will remain temporary.

Any semblance of normality is now shattered for the refugees. "We never asked for anything," Tsodniashvili said. "We always lived from the fruit of our own labour." Now she possesses a dresser with three of its six drawers and a rickety green chair without a seat. "We don't have anything to heat water with," Tsodniashvili said, and added with the flat tone of exhausted despair: "We don't even have a bucket."

While ordinary Georgians have paid a heavy price, their president, Mikheil Saakashvili, may emerge the winner. Until a week ago, his cries that Russia was manipulating the enclaves of Abkhazia and South Ossetia were ignored. Not any more. The weapons Saakashvili's army lost will be quickly replaced by America, which has already moved naval assets into the Black Sea. Nato will find it hard come December to deny Georgia's request to join the alliance.

Meanwhile, the "ring" that Russia so fears has been tightened. After months of prevaricating, Washington on Thursday seized its chance to cement a deal with Poland to set up its missile defence system, knowing Russia was in no position to complain. Even a last-minute Polish demand for US troops and Patriot anti-aircraft missile batteries played into the hands of the Bush administration, which can now station troops further forward than ever before.

Putin, meanwhile, has gained world opprobrium in exchange for two meaningless pieces of Georgian real estate, Abkhazia and South Ossetia, which he already controlled. Critics inside Russia say Putin's real problem is that he is a century out of date, trapped in the Great Power mould of thinking that culminated in the First World War.

"The thinking in the Kremlin matches the realpolitik of the 19th century," writes Alexander Golts, a military expert in the Moscow Times. "Moscow's leaders view the relationships between states as an endless conflict."

Russia's membership of the G8 is hanging by a thread, and international invitations to visit the West will be in short supply from now on. At the United Nations in New York, shouting matches not seen since the end of the Cold War have erupted between Russia's ambassador Vitaly Churkin and his western counterparts.

"Russian forces have certainly violated respect for the international norms of peacekeeping," complained Britain's deputy ambassador Karen Pierce. "It is a grotesque distortion by Russia to claim their actions are promoting peace."

The gulf between Russia and the West which has opened over disputes over Kosovo, Darfur and Zimbabwe is now a yawning chasm, with both sides struggling to garner support among the mass of smaller nations.

French President Nicholas Sarkozy was, meanwhile, humiliated. As chairman of the European Union, he raced to Moscow to try to mediate a peace deal, leaving with the promise from Medvedev to halt the fighting. But with his plane still in the air, Russian tanks, jets and gunboats resumed their bombardment, leaving Sarkozy's mission in tatters.

All this has given the American public a new enemy, just as the terrors of al-Qaeda were starting to subside and the drop in violence in Iraq had pushed that war off the front pages. Presidential candidates, John McCain and Barack Obama, tumbled over themselves to be the first to condemn Russia's actions and portray Moscow as Public Enemy Number One.

Condoleezza Rice arrived in Tbilisi on Friday to bolster the diplomatic push by the West. Saakashvili signed a ceasefire deal, but the world was waiting yesterday to see if Moscow's claims that it will "faithfully" implement the deal would bear fruit as reports emerged of military advances still being made in towns surrounding the Georgian capital.

If conditions deteriorate, Ukraine faces being dragged into events. Russia has described as "illegitimate" a Ukrainian decree that its warships must obtain permission before entering or leaving base in Sevastopol. The standoff brings the risk of diplomatic and even military confrontation between Moscow and Ukraine, a former Soviet republic of nearly 50 million people.

In the best case, a fragile ceasefire will become firmer and signs of a Russian withdrawal from Georgia proper could create a diplomatic breathing space. Otherwise the Russians risk being further spooked as investors reassess the investment climate of Moscow and the rest of the former Soviet Union. Oil markets, already rattled, could move higher if shipments are disrupted, with Georgia's port of Poti a particular focus.

Back in Moscow there was no sign, on the streets at least, of a demand for Russia to rein in its forces. "Now we will be more respected," Marina Katayeva said outside. Next to her, Alyona Latyuk, 22, added: "I hope that now the West learns a lesson."

Artyem Bychkov spent his smoking breaks last week watching people stream into a South Ossetian cultural centre near the cafe where he works to deliver donations for refugees who fled the fighting.For him, it was no surprise that Russia had the boldness and the ability to take the steps it took. "I never had any doubts," he said. "Only the West didn't understand."

To Bychkov, 27, Russia's military successes are the logical conclusion of Russia's progression from the poor country he knew years ago to the oil power it is today.

He was a child when Russia's economy fell apart with the Soviet Union. His mother, a teacher, did not get her salary for nearly a year. The family lived on cucumbers and potatoes they grew themselves. Their town outside Moscow was a crumbling backwater. "Russia is rising," proclaimed Bychkov.

The great game

Craig Murray, Britain's ambassador to Uzbekistan between 2002 and 2004, is now a prominent critic of western policy. Here he gives opinion on the growing tensions

The events of last week should be viewed through the power-politics of the former Soviet Union, where Putin has very aggressively re-established Russian dominance in a lot of the region.

Putin shouldn't be underestimated – he's a very wily player. And the West, of course, is in a very bad position. George Bush accusing someone of an illegal invasion is like the pot calling the kettle black. Fascinatingly, the excuse the Russians are putting out today is that they are only invading Georgia to eliminate weapons systems which pose a threat to their neighbours. This is exactly the same excuse the Americans and British used for invading Iraq, and the Russians are, of course, deliberately using the same form of words.

The truth of the matter is that the US can huff and puff but their ability to do anything about it is very limited.

The EU position is also very interesting. Over 40% of Germany's electricity is powered by Russian gas. Within five years that will be over 60%, as the Nord Stream Russian-German gas project comes into operation. Russia can quite simply turn the lights off on Germany.

In effect, Gazprom now has a veto on German foreign policy relating to the East. Germany no longer has the ability to stand up to Russia diplomatically – by making itself completely energy-dependent, its hands are tied.

This is part of the 'great game' for the Caucasus region of Central Asia, and it's about raw power.

Putin holds many more cards than Bush. The wars in Iraq and Afghanistan haven't helped. Britain and the USA have undercut their moral authority. If they say to the Russians: "You are impinging on the sovereign territory of another country by invading," the Russians can just smirk.