The changing geopolitical role of Putin's Russia
 
Philip Bowring International Herald Tribune
Friday, June 7, 2002
Moscow This week's visit to Russia by President Jiang Zemin of China, following that of President George W. Bush and immediately after the Almaty summit, has illustrated the extent to which Russia, the West and China are now tied together by fear of Muslim militancy. The acceptance by Moscow and Beijing of a U.S. military presence in Central Asia is testimony to their worries, as is the existence of the Shanghai Cooperation Organization comprising China, Russia and the Central Asian states and Jiang's trip.
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This concern has paid short-term dividends: For the West it has meant progress on nuclear arms reduction, Russia's grudging acceptance of eastward expansion by NATO and the EU, and of Washington's ending of the ABM agreement; for Russia it has brought Western tolerance of oppressions in Chechnya; for the Central Asians tolerance of despotism; and for Beijing a dilution of U.S. anti-China sentiment. But it is a negative bond, already under stress as the regional focus has shifted from Afghanistan to Kashmir.
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For Russia, the bond needs to be replaced with something more constructive if there is not to be a domestic reaction against President Vladimir Putin's accommodations with the West. Reaction would have major negative consequences for domestic economic reform as well as international relations.
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Thus far, Putin's domestic successes have enabled him to conduct a foreign policy which is widely unpopular. Perceptions of humiliation over the Baltics and Central Asia and resentment at U.S. pressure over Iran, a friendly neighbor despite religion, are for now overshadowed by improving standards of governance, the reining in of the robber barons created by privatization, a reviving economy and Putin's image as a leader who can more than hold his own with Bush and Jiang.
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In short, he is still mostly trusted to be doing his best, with few cards, to represent Russian interests. But so far he has received little from the West for the favors which Russian weakness has forced him to grant. Putin seems to recognize that his political future relies heavily on his ability to maintain the recovery of the Russian economy. So far, he has had the good fortune to enjoy the benefits of the 1998 devaluation, the bottoming out of the post-Soviet industrial collapse, and a pick up in oil prices. The economy grew an average 6 percent a year from 1999 to 2001.
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But the pace is slowing. To sustain recovery Russia needs a lot more investment, and trade. Last week the European Union took a small step to encourage trade with Russia by acknowledging it to be a market economy, and thus not so easily subject to anti-dumping measures. But Washington has conspicuously failed to do the same. Russian membership in the World Trade Organization is still distant. China, for one, may be quietly obstructive, suspecting that WTO membership would strengthen Russia's ties with the West and weaken the other bond between China and Russia resentment of the United States.
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Investment has only partly recovered despite the huge potential in resources and consumer goods. Industry is now operating at close to capacity. The World Bank estimates that reforms would generate investment enabling the economy to grow at 4 to 6 percent even with lower oil prices. Otherwise it could slip back to 1 to 2 percent, a miserable level given that incomes are extraordinarily low for such a resource-rich, well-educated nation.
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Investment is picking up as conditions become more stable. There has been a sharp decline in capital flight.Some of the estimated $130 billion that Russians have shipped offshore may return. But bureaucracy, power struggles in the regions and the vested interests of the new oligarchs still militate against investment and the creation of internationally competitive industries.
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Failure to modernize the economy will make relations with a prosperous Europe increasingly difficult. Failure to develop the Far East will have implications vis--vis a China whose territorial expansion has historically been led by work-seeking settlers. Yet Russia is now at a juncture where it could grow very rapidly, catching up with Europe in the same way that poor Europe caught up with rich Europe under the stimulus of EU trade and capital flows.
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Proud, cut off, confused about its own future, resentful of others' successes, Russia is not an easy partner. But more focus on economic issues and less on Islamic and strategic questions are the best investment the West could make in the future of Russia, and indeed of Europe itself.
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