Putin's Russia in 2007: Walking a Tightrope
December 2006
Russia in 2007 has much in common with the
former Soviet Union. President Putin has revived the decades-old policy of attempting
to use "spheres of influence" to once again make Russia a world power. The concept
of "comradeship" between Russia and the West is now nothing more than a marriage
of convenience. What has happened in Russia since 2000 underscores the difficulty
of predicting the future when political change occurs.
by Daniel
Wagner*
When Vladimir Putin first became President of Russia in January 2000, there
was an air of optimism about the future. This young, brash former KGB agent
was, after all, hand picked by Boris Yeltsin to lead Mother Russia into the
new millennium because of his perceived competence and steady pair of hands.
Mr. Putin is indeed competent and has a steady pair of hands. The problem is
that he is leading Russia boldly into its past.
In "Russia in 2000: The Implications of Political
Change in the New Millennium," written immediately following Mr. Putin's
elevation to the Office of the President, I wrote that this was in part a response
to the Russian people's increasing propensity toward nationalism and nostalgia
for a restoration of the country's former glory as a world power. I also noted
that Putin is a man who was produced by a system accustomed to imposing its
will, that his democratic credentials had yet to be established, and that his
presidency was likely to mark a return to strained relations with the West.
Unfortunately, my predictions have all proven true, and Russia today is very
much akin to Russia before the Soviet Union disintegrated in 1990.
A "Partner"?
What makes current-day Russia equally dangerous is that Mr. Putin has deftly
managed to walk a tightrope between being a trusted partner of the West and
undermining Western strategic objectives. Mr. Putin successfully elbowed his
way onto the world stage, became a player with the West by joining the G8 and
soon the World Trade Organization (WTO), and solidified Russia's importance
as a regional and global power broker. At the same time, he has succeeded in
eroding Russia's post-1990 democratic underpinnings, trampled on human rights,
strengthened Russia's grip on Europe's gas supply, become a supporter of such
anti-U.S. figures as Hugo Chavez of Venezuela and Kim Jong Il of North Korea,
and sabotaged American foreign policy objectives in the Middle East. Oddly,
despite all this, his role as a "partner" of the West continues unabated in
the capitals of Europe and the United States.
In 2005 Russia signed a billion dollar arms deal with Hugo Chavez, whose
anti-U.S. credentials were by then well established. The message being sent
to Washington in the process seems unmistakable: Russia supports pro-Socialist
governments in Latin America and will not hesitate to provide them with arms.
In 2006 Russia began to deliver highly sophisticated SA-15 anti-aircraft missiles
to Iran. Russia's Defense Minister claimed at the time that "the missiles will
have no influence on the balance of power in the region."1 In addition to Russia's inexplicable continuing support of the development of
Iran's dual use nuclear power industry, Russia is giving Iran the ability to
defend itself against possible attack on its nuclear weapons production sites,
much to the consternation of Washington and Tel Aviv. In 2006 Russia also had
plans to supply North Korea with advanced encryption and nuclear storage systems,
coinciding with North Korea's nuclear test. What kind of a message can this
be sending to Washington and North Korea's neighbors?
For Mr. Putin's Russia, it seems few boundaries have been drawn, and even
fewer enforced by the international community, which seems incapable of constraining
Russia. Russia can sell arms to rogue states (Iran), interfere in foreign elections
(Ukraine in 2004), poison presidential candidates (Ukraine in 2004), and wipe
out political dissidents (London in 2006). This says as much about Mr. Putin's
strength as it does about the international community's weakness. Since Russia
is a member of the G8 and soon the WTO, there appears to be little the United
States or any other country can do to modify its behavior. The country's membership
in these organizations has served to undermine the West's ability to restrain
Russia.
Russia's position as the world's largest oil and gas exporter2 gives Mr. Putin substantial leverage. There is generally a lot of focus on the
power of OPEC to influence global oil prices, but in reality, any national oil
producer has the same ability, given the continuing tightness of oil supplies
(witness the spike in the price of oil any time there is a minor interruption
of supply). Russia's dominant position in the global oil and gas markets makes its ability to influence
energy prices unrivaled. If the axis of energy producers friendly with Moscow
were to adopt a common approach to manipulating energy markets—which is not
inconceivable given Mr. Putin's close ties with Iran and Venezuela—Moscow's
position becomes even stronger. Hence the focus on future energy prices should
be oriented toward both Russia's and OPEC's actions. This is another major reason
why the West is hesitant to scold Russia too strongly for its foreign adventurism
or deteriorating human rights situation at home.
Mr. Putin appears to have a number of long-term foreign policy objectives:
- To strengthen Russia's sphere of influence over its neighboring states;
- To gain political advantage through the establishment of strong economic
ties with countries it deems important;
- To increase dependence on Russian energy supplies; and
- To strengthen Russia's strategic relationship with Europe (Russia's
most important regional relationship) at the expense of the USA.3
"Uni-polar" versus "Multi-polar"
Russia's concern about America's perceived attempt to create a "uni-polar"
world is a recurring theme in Russian foreign policy. Alliance building has
become a hallmark of the Putin era, and Russia's alliances shift depending on
its objectives. In the case of Iraq, for example, Russia allied itself with
France and Germany to oppose the American invasion.
Alliances of convenience may therefore be expected to continue to promote
Russia's foreign policy objectives, which also serves to share the costs of
building global influence. Russia sees a multi-polar world as the best opportunity
to safeguard its interests.4
Now that Mr. Putin's "stripes" are clear, what can be expected from Russia
for the remainder of his tenure as president and beyond? Clearly, Russia can
be expected to continue to maintain its practice of establishing and nurturing
a broad range of alliances with like-minded governments to promote its own interests
and oppose a variety of American foreign policy objectives in the hope of creating
a multi-polar world more akin to its own foreign policy objectives. Russia can
also be expected to continue to flex its muscles with respect to energy supply
and policy, both to influence its economic and political relationships with
its neighbors and to help ensure its predominance in the energy business. Mr.
Putin can also be expected to continue his deft tightrope walk of embracing
Western interests and institutions while pursuing policies that are in Russia's
long-term interest.
Conclusion
Russia has been, and continues to be, one of the countries where political
risk insurance is most frequently requested—an indication of both its interest
as an investment destination and a source of concern among foreign investors.
The risk of loss due to acts of political violence remains foremost on investors'
minds, as does the risk of acts of expropriation or forced renegotiation of
contracts by the Russian government. In this regard, Russia remains a land of
opportunity that includes substantial potential risk.
*The views expressed herein are solely the author's.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author's employer or IRMI. Expert Commentary articles
and other IRMI Online content do not purport to provide legal, accounting, or other
professional advice or opinion. If such advice is needed, consult with your attorney,
accountant, or other qualified adviser.