When Vladimir Putin became President in 2000, Russia's military machine was enfeebled. A ruthless campaign to regain control of breakaway Chechnya and a quadrupling of the defense budget signaled a new willingness to defend Russian interests, especially in pro-Moscow enclaves such as Abkhazia and South Ossetia. Last year, Russia resumed its Cold War practice of flying long-range bombers close to U.K. and U.S. airspace, and a few weeks ago the Navy announced that its Northern Fleet warships were patrolling the Arctic Ocean for the first time since the end of the Soviet Union in 1991. As the world's second-largest arms supplier, Russia also exerts influence by selling missiles and antiaircraft systems to countries such as Iran.
Since the financial crisis in 1998, Russia's GDP has grown about 7% a year, riding a huge rise in oil and gas prices. Moscow wields its bounty as a kind of geopolitical weapon, cutting supplies to former clients such as Belarus and the Czech Republic, with which it has quarreled.
Foreign money has flooded into Russia's booming economy, but state interference and poor governance still dog its dealings with investors. Homegrown oil giant Yukos was forced into bankruptcy in 2006 with the bulk of its assets picked up by state-owned Rosneft. Shell was made to sell a controlling stake in the joint venture it was leading on Sakhalin Island to state-run Gazprom, while recent efforts by Russian joint-venture partners to wrest control of TNK-BP away from British Petroleum have also rattled investors.
As one of the UN's five permanent Security Council members, Russia blocked approval last year for Kosovo's independence, and in July it vetoed sanctions against Robert Mugabe's regime in Zimbabwe. When the U.S. signed a deal with the Czech Republic to build missile-tracking equipment there, President Medvedev threatened: "We will be forced to respond to it in kind."
In apparent retaliation for Estonia's removal of a statue of a Soviet hero from a Tallinn park, Estonian government, media and financial sites were clogged for a month in 2007 by a flood of data reportedly emanating from Russia. Similar crippling attacks on Georgian websites occurred in the days before Russian tanks rolled in.
A reinvigorated space program, the return of powerful displays of weaponry at the Victory Day parade in Moscow, and a 2007 expedition to plant a Russian flag beneath the Arctic are all part of the government's drive to restore national pride in Russia's might.