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Putin's arms deals: It ain't about the money

Russian President Vladimir Putin
Alexei Nikolsky | RIA Novosti | Kremlin | Reuters
Russian President Vladimir Putin

There's an old joke about the 1970s-era Middle East that goes like this: The USSR sells MiG jet fighters to the Syrians and sends a team of flight trainers to Damascus. After a few weeks of teaching the Syrian air force pilots how to fly the MiGs, the Russians pack up to go back home. The stunned Syrians run after the Soviets and exclaim, "Hey! You've told us how to fly these jets, but you haven't yet instructed us on how to land them!" At that, the Russians just smile and say, "Don't worry, the Israelis will teach you how to land!" The joke had a strong taste of truth for two reasons. First, the Israelis always seemed to achieve quick and dominant air superiority in the Arab-Israeli wars no matter what weapons the Syrians, Egyptians or Jordanians had. And second, the Soviets never really sold or supplied arms for economic reasons or with anything else really in mind other than inciting chaos.

Just looking at the numbers, one might think that Russian arms sales these days are indeed about the money. That's because the market is booming. Moscow has boosted its market share of the international weapons market by 37% since 2010. Arms sales brought in $15 billion in revenue for Russia last year alone, slightly easing the pain of the oil price collapse. President Vladimir Putin even sounded like a forward-thinking CEO earlier this year when he noted that more and more nations are becoming potential customers because of their need to modernize their armed forces. He touted Russia's ability to provide higher tech weaponry and defensive systems during a January conference of Russia's Orwellian-sounding "Commission for Military Technology Cooperation."

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But Russia expert and CNBC producer Dina Gusovsky isn't buying it.

Despite the growing revenues arms dealing can offer Russia's crumbling economy, Gusovsky says Putin's boosted arms sales are, "more about political motives than about money. If Putin can do something to hurt the U.S. and incite discomfort among America's allies, then that's the primary goal."

That theory certainly seems to be playing out right now. Russia's arms sales are big news again these days now that Putin is going ahead with the sale of S-300 missiles to Iran even as Tehran is in the midst of final negotiations with the U.S. and five other nations, including Russia, over its nuclear program. While Israel and Arab leaders in the region have strongly condemned that sale, Putin has been quick to point out that the current sanctions rules do not bar the sale of the anti-aircraft, so-called "defensive weapons." And many Israeli journalists and politicians were shocked on Friday when President Barack Obama did not criticize the deal and even seemed to defend it during a news conference at the White House. By stoking fears of a nuclear Iran with enhanced missile defenses against foreign air strikes and by pushing another wedge between Israel and the Obama administration, this S-300 deal has already produced a major chaos premium for Moscow. The money it gets from the Ayatollahs is just gravy.

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Any market where the suppliers are motivated by something other than profit is not really a healthy free market. And the world market for arms sales has always been skewed in that way. But even in this tainted marketplace there is still plenty of competition, and that's something that could make Putin think twice about escalating his arms sales "chaos strategy." The competition in this instance would be Israel, which has already responded by announcing it may now sell advanced weapons systems to Russian rivals Ukraine and Georgia. This weekend Putin angrily warned Israel against doing that, proving once again that most bullies can't ever take a dose of their own medicine. But Putin better get used to it because arming some nations at the expense of others tends to elicit a response, and that response isn't always one you can control.

Almost 25 years after the collapse of the USSR and its disruptive foreign policy, Putin is still operating from that same old Soviet playbook that cared little for advancing the economic fortunes of its own people and cared even less for the safety of the innocent people of the rest of the world. That playbook eventually brought the Soviet Union down, thanks also to resolute and strong leadership in America. But with the Obama administration looking more and more to withdraw U.S. influence on the world stage, the question is how much longer Putin will stay in the Kremlin beyond his rightful expiration date.

Commentary by Jake Novak, supervising producer of "Power Lunch." Follow him on Twitter @jakejakeny.